Question
Steinberg is considering investing in a new chip manufacturing machine with an estimated lifespan of three years. The cost of the machine is $ 30,000
Steinberg is considering investing in a new chip manufacturing machine with an estimated lifespan of three years. The cost of the machine is $ 30,000 and the depreciation on the machine will be calculated by the straight-line method over three years (i.e. its estimated value after three years is $ 0). The chip manufacturing machine is expected to bring in sales of 2000 chips in the first year. Sales are expected to grow by 10% each year until the end of the third year. The price for each chip that the company will charge is $ 18, and it is expected to remain constant throughout the three years. The cost of production per chip is $ 9. The tax rate is 35% and the company has a capital cost of 10%. You must build a profit and loss statement showing EBIT and the accrued earnings (Incremental Earnings Forecast) for all three years of the Steinberg company and estimate the company's value according to the FCF method.
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