Panjandrum Industries, a manufacturer of industrial piping, is evaluating whether it should expand into the sale...
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Panjandrum Industries, a manufacturer of industrial piping, is evaluating whether it should expand into the sale of plastic fittings for home garden sprinkler systems. It has made the above estimates of free cash flows resulting from such a decision. There are concerns of the sensitivity of this project to changes in the cost of capital. For what cost of capital does this project break-even? Years 1 to 10 Year 0 Revenues - Manufacturing Expenses -Marketing Expenses - Depreciation =EBIT - Taxes (40%) 3.35 -0.4 -0.2 -0.8 1.95 -0.78 Unlevered net income 1.17 +Depreciation +0.8 -Additions to Net Working Capital -0.3 -Capital Expenditures -7 =Free Cash Flow 1.67 Panjandrum Industries, a manufacturer of industrial piping, is evaluating whether it should expand into the sale of plastic fittings for home garden sprinkler systems. It has made the above estimates of free cash flows resulting from such a decision. There are concerns of the sensitivity of this project to changes in the cost of capital. For what cost of capital does this project break-even? Years 1 to 10 Year 0 Revenues - Manufacturing Expenses -Marketing Expenses - Depreciation =EBIT - Taxes (40%) 3.35 -0.4 -0.2 -0.8 1.95 -0.78 Unlevered net income 1.17 +Depreciation +0.8 -Additions to Net Working Capital -0.3 -Capital Expenditures -7 =Free Cash Flow 1.67
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Related Book For
Statistics For Business And Economics
ISBN: 9780321826237
12th Edition
Authors: James T. McClave, P. George Benson, Terry T Sincich
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