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Haiku, Inc is considering a new project. The details are below. Vanessa Cost of new project $84,000 Installation costs $12,000 Estimated unit sales in year
Haiku, Inc is considering a new project. The details are below.
| Vanessa | |
| Cost of new project | $84,000 |
| Installation costs | $12,000 |
| Estimated unit sales in year 1 | 200 |
| Estimated sales price in year 1 | $280 |
| Variable cost per unit | 55% |
| Fixed cost year 1 | $5,000 |
| Initial working capital needs | $4,000 |
| Working Capital Needs | 6% of sales each year |
| Depreciation Method | 10 years straight-line method, no salvage value |
| Tax Rate | 37% |
| discount | 14% |
| Beta | 0.95 |
| Risk Free Rate | 3% |
| Risk Premium | 5% |
| Debt Ratio | 35% |
| Cost of Borrowing | 9% |
Calculate and fill in the chart below with the equations and determine if the project should be accepted:
| Operating Cash Flow | |
| Year | ? |
| Units Sold | ? |
| Sale Price | ? |
| Sales Revenue | ? |
| Less: Variable Costs | ? |
| Less: Fixed Costs | ? |
| Equals: EBIT | ? |
| Less: Taxes @40% | ? |
| Plus: Depreciation | ? |
| Equals: Operating Cash Flow | ? |
| Change in Net Working Capital | |
| Initial Working Capital Requirement | ? |
| Net Working Capital Needs | ? |
| Liquidation of Working Capital | ? |
| Change in Working Capital | ? |
| Free Cash Flow | |
| Operating Cash Flow | ? |
| Minus: Change in Net Working Capital | ? |
| Minus: Change in Capital Spending | ? |
| Free Cash Flow | ? |
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