Past Performance

Last year the company had the following financial data.

Sales $30,000,000

Cost of goods sold 18,000,000

Gross profit $12,000,000

Selling and administrative expense 3,000,000

Depreciation expense 4,000,000

Earnings before taxes $5,000,000

Taxes (30%) 1,500,000

Earnings after taxes $3,500,000

Plus depreciation 4,000,000

Cash flow $7,500,000

Projections

Sales +11%

Cost of goods sold +8%

Selling and administrative expense +20%

Depreciation +10%

She was doing a 10 year analysis and expected cash flow to grow by 12% each of the remaining 9 years. She used 10% as the discount rate.

She further projected she could sell the company for $140 million after 10 years and pay 15% tax on the proceeds.

Questions: Please show and explain all calculations

1. Calculate the sales price proceeds after 10 years. Round to the nearest dollar.

2. Should the company be purchased?

3. What other considerations should she consider when making her decision (economic, risk, corporate governance, etc)