The college would like to use your general business knowledge to identify potential side- effects, positive or negative, that might affect the feasibility of the

The college would like to use your general business knowledge to identify potential side- effects, positive or negative, that might affect the feasibility of the Paint Jude project. Specifically, are there any ways that launching Paint Jude could affect the colleges existing programs? o Identify and explain one possible positive side-effect and one possible negative side-effect. Explain how these possible side-effects would affect your cashflow/NPV calculation and overall recommendation if theyre deemed likely?

ASAP I HAVE ONLY 15 MINUTES

image text in transcribed

B D E F G H Value 1 Assumptions 2 3 4 5 $ $ 6 7 8 9 Buy fixed assets Sell fixed assets (pretax) After tax cash flow from sale NWC required in year o Opportunity cost (selling land) Year 1 student enrollment Revenue per student Variable cost per student Sunk costs Fixed costs Tax rate Discount rate Enrollment growth per yer Annual Costs Accounts Payable Accounts Recieveable $625,000.00 $300,000.00 $237,000.00 70,000.00 495,000.00 75 $25,000.00 $15,500.00 $200.00 550,000.00 21.00% 9.50% 15 10 11 $ 12 13 14 15 16 17 18 $ $ $ 15,500.00 30,000.00 100,000.00 19 20 21 Basic Financial Data 22 0 23 24 25 Units (students) Revenue Variable costs (VC * #students) Fixed costs Total cost MACRS percent Depreciation 2 75 90 105 120 $1,875,000.00 $2,250,000.00 $2,625,000.00 $3,000,000.00 $1,162,500.00 $1,395,000.00 $1,627,500.00 $1,860,000.00 $ 550,000.00 $ 550,000.00 $ 550,000.00 $ 550,000.00 $1,712,500.00 $1,945,000.00 $2,177,500.00 $2,410,000.00 33.33% 44.45% 14.81% 7.41% $208,312.50 $277,812.50 $92,562.50 $46,312.50 26 27 28 29 30 Calculate OCF 0 29 $1,875,000.00 $1,712,500.00 $208,312.50 ($45,812.50) ($9,620.63) ($36,191.88) $208,312.50 $172,120.63 $2,250,000.00 $1,945,000.00 $277,812.50 $27,187.50 $5,709.38 $21,478.13 $277,812.50 $299,290.63 $2,625,000.00 $2,177,500.00 $92,562.50 $354,937.50 $74,536.88 $280,400.63 $92,562.50 $372,963.13 $3,000,000.00 $2,410,000.00 $46,312.50 $543,687.50 $114,174.38 $429,513.13 $46,312.50 $475,825.63 1 $172,120.63 $299,290.63 $372,963.13 30 Calculate OCF 0 31 Revenue 32 - Total cost 33 Depreciation 34 = EBIT 35 taxes 36 = Net income 37 + Depreciation 38 = OCE 39 40 Calculate cash flow 0 41 OCF 42 CF from change in NWC $ (70,000.00) 43 (after tax) Capital cash flows ($625,000.00) 44 Opportunity cost $ (495,000.00) 45 Total cash flow (CFFA) ($1,190,000.00) 46 PV of total cash flow 1-4 47 NPV $45,381.63 48 IRR 10.89% 49 50 NPV Sensitivity 51 Number of Students NPV Sensitivity 52 750 $ 45,381.63 $ 24,049.63 53 90 $ 406,126.09 $ 24,049.63 54 105 $ 766,870.56 $ 24,049.63 55 120 $ 1,127,615.02 $ 24,049.63 4 $475,825.63 70,000.00 $237,000.00 $ $172,120.63 $157,187.79 $299,290.63 $249,611.66 $372,963.13 $284,068.80 $782,825.63 $544,513.38 Scenario Base Best Worst OCF Base OCF Best OCF Worst Revenue/ stu Annual Fixec Annual cost per student $25,000.00 ### ######### $12,500.00 ########## $ $7,750.00 $37,500.00 $37,500.00 $37,500.00 $51,250.63 $47,498.13 $43,745.63 - - - . NPV Best NPV Worst ($3,752.50) ($7,505.00) 1 Value $625,000.00 $300,000.00 $ 237,000.00 $ 70,000.00 $ 495,000.00 751 $25,000.00 $15,500.00 | Assumptions 2 Buy fixed assets 3 3 Sell fixed assets (pretax) . After tax cash flow from sale 5 5 NWC required in year 0 5 Opportunity cost (selling land) - Year 1 student enrollment B 3 Revenue per student e Variable cost per student 0 Sunk costs 1 1 Fixed costs 2 2 Tax rate 3 Discount rate 4 Enrollment growth per yer 5 Annual Costs 6 Accounts Payable 7 7 Accounts Recieveable 8 $ $200.00 522.500.00 21.00% 9.50% $ S 15 14,725.00 30,000.00 100,000.00 $ 9 0 1 3 4 0 1 Basic Financial Data 2 Units (students) 3 Revenue 4 Variable costs (VC * #students). 5 Fixed costs 6 Total cost 7 MACRS percent 8 Depreciation 75 $1,875,000.00 $1,162,500.00 522,500.00 IS $1,685,000.00 33.33% $208,312.50 2 90 $2,250,000.00 $1,395,000.00 522,500.00 IS $1,917,500.00 44.45% $277,812.50 $ 105 $2,625,000.00 $1,627,500.00 522,500.00 $ $2,150,000.00 14.81% $92,562.50 120 $3,000,000.00 $1,860,000.00 522,500.00 $2,382,500.00 7.41% $46,312.50 0 1 2 4 - - 75 $1,875,000.00 $1,162,500.00 522,500.00 $ $1,685,000.00 33.33% $208,312.50 $ 3 105 $2,625,000.00 $1,627,500.00 522,500.00 $ $2,150,000.00 14.81% $92,562.50 90 $2,250,000.00 $1,395,000.00 522,500.00 $ $1,917,500.00 44.45% $277,812.50 120 $3,000,000.00 $1,860,000.00 522,500.00 $2,382,500.00 7.41% $46,312.50 - 0 1 - 20 21 Basic Financial Data 22 Units (students) 23 Revenue 24 Variable costs (VC * #students) 25 Fixed costs 26 Total cost 27 MACRS percent 28 Depreciation 29 30 Calculate OCF 31 Revenue 32 - Total cost 33 - Depreciation 34 = EBIT 35 - taxes 36 = Net income 37 + Depreciation 38 = OCF 39 40 Calculate cash flow 41 OCF 42 CF from change in NWC 43 (after tax) Capital cash flows 44 Opportunity cost 45 Total cash flow (CFFA) 46 PV of total cash flow 1-4 47 NPV $1,875,000.00 $1,685,000.00 $208,312.50 ($18,312.50) ($3,845.63) ($14,466.88) $208,312.50 $193,845.63 2 $2,250,000.00 $1,917,500.00 $277,812.50 $54,687.50 $11,484.38 $43,203.13 $277,812.50 $321,015.63 3 $2,625,000.00 $2,150,000.00 $92,562.50 $382,437.50 $80,311.88 $302,125.63 $92,562.50 $394,688.13 4 $3,000,000.00 $2,382,500.00 $46,312.50 $571,187.50 $119,949.38 $451,238.13 $46,312.50 $497,550.63 - - 0 1 $193,845.63 2 2 $321,015.63 3 $394,688.13 4 $497,550.63 70,000.00 $237,000.00 $ S(70,000.00) ($625,000.00) $ (495,000.00) ($1,190,000.00) $193,845.63 $177,027.97 $321,015.63 $267,730.55 $394,688.13 $300,615.73 $804,550.63 $559,624.73 $114,998.98 13.00% 48 IRR B D E F G H Value 1 Assumptions 2 3 4 5 $ $ 6 7 8 9 Buy fixed assets Sell fixed assets (pretax) After tax cash flow from sale NWC required in year o Opportunity cost (selling land) Year 1 student enrollment Revenue per student Variable cost per student Sunk costs Fixed costs Tax rate Discount rate Enrollment growth per yer Annual Costs Accounts Payable Accounts Recieveable $625,000.00 $300,000.00 $237,000.00 70,000.00 495,000.00 75 $25,000.00 $15,500.00 $200.00 550,000.00 21.00% 9.50% 15 10 11 $ 12 13 14 15 16 17 18 $ $ $ 15,500.00 30,000.00 100,000.00 19 20 21 Basic Financial Data 22 0 23 24 25 Units (students) Revenue Variable costs (VC * #students) Fixed costs Total cost MACRS percent Depreciation 2 75 90 105 120 $1,875,000.00 $2,250,000.00 $2,625,000.00 $3,000,000.00 $1,162,500.00 $1,395,000.00 $1,627,500.00 $1,860,000.00 $ 550,000.00 $ 550,000.00 $ 550,000.00 $ 550,000.00 $1,712,500.00 $1,945,000.00 $2,177,500.00 $2,410,000.00 33.33% 44.45% 14.81% 7.41% $208,312.50 $277,812.50 $92,562.50 $46,312.50 26 27 28 29 30 Calculate OCF 0 29 $1,875,000.00 $1,712,500.00 $208,312.50 ($45,812.50) ($9,620.63) ($36,191.88) $208,312.50 $172,120.63 $2,250,000.00 $1,945,000.00 $277,812.50 $27,187.50 $5,709.38 $21,478.13 $277,812.50 $299,290.63 $2,625,000.00 $2,177,500.00 $92,562.50 $354,937.50 $74,536.88 $280,400.63 $92,562.50 $372,963.13 $3,000,000.00 $2,410,000.00 $46,312.50 $543,687.50 $114,174.38 $429,513.13 $46,312.50 $475,825.63 1 $172,120.63 $299,290.63 $372,963.13 30 Calculate OCF 0 31 Revenue 32 - Total cost 33 Depreciation 34 = EBIT 35 taxes 36 = Net income 37 + Depreciation 38 = OCE 39 40 Calculate cash flow 0 41 OCF 42 CF from change in NWC $ (70,000.00) 43 (after tax) Capital cash flows ($625,000.00) 44 Opportunity cost $ (495,000.00) 45 Total cash flow (CFFA) ($1,190,000.00) 46 PV of total cash flow 1-4 47 NPV $45,381.63 48 IRR 10.89% 49 50 NPV Sensitivity 51 Number of Students NPV Sensitivity 52 750 $ 45,381.63 $ 24,049.63 53 90 $ 406,126.09 $ 24,049.63 54 105 $ 766,870.56 $ 24,049.63 55 120 $ 1,127,615.02 $ 24,049.63 4 $475,825.63 70,000.00 $237,000.00 $ $172,120.63 $157,187.79 $299,290.63 $249,611.66 $372,963.13 $284,068.80 $782,825.63 $544,513.38 Scenario Base Best Worst OCF Base OCF Best OCF Worst Revenue/ stu Annual Fixec Annual cost per student $25,000.00 ### ######### $12,500.00 ########## $ $7,750.00 $37,500.00 $37,500.00 $37,500.00 $51,250.63 $47,498.13 $43,745.63 - - - . NPV Best NPV Worst ($3,752.50) ($7,505.00) 1 Value $625,000.00 $300,000.00 $ 237,000.00 $ 70,000.00 $ 495,000.00 751 $25,000.00 $15,500.00 | Assumptions 2 Buy fixed assets 3 3 Sell fixed assets (pretax) . After tax cash flow from sale 5 5 NWC required in year 0 5 Opportunity cost (selling land) - Year 1 student enrollment B 3 Revenue per student e Variable cost per student 0 Sunk costs 1 1 Fixed costs 2 2 Tax rate 3 Discount rate 4 Enrollment growth per yer 5 Annual Costs 6 Accounts Payable 7 7 Accounts Recieveable 8 $ $200.00 522.500.00 21.00% 9.50% $ S 15 14,725.00 30,000.00 100,000.00 $ 9 0 1 3 4 0 1 Basic Financial Data 2 Units (students) 3 Revenue 4 Variable costs (VC * #students). 5 Fixed costs 6 Total cost 7 MACRS percent 8 Depreciation 75 $1,875,000.00 $1,162,500.00 522,500.00 IS $1,685,000.00 33.33% $208,312.50 2 90 $2,250,000.00 $1,395,000.00 522,500.00 IS $1,917,500.00 44.45% $277,812.50 $ 105 $2,625,000.00 $1,627,500.00 522,500.00 $ $2,150,000.00 14.81% $92,562.50 120 $3,000,000.00 $1,860,000.00 522,500.00 $2,382,500.00 7.41% $46,312.50 0 1 2 4 - - 75 $1,875,000.00 $1,162,500.00 522,500.00 $ $1,685,000.00 33.33% $208,312.50 $ 3 105 $2,625,000.00 $1,627,500.00 522,500.00 $ $2,150,000.00 14.81% $92,562.50 90 $2,250,000.00 $1,395,000.00 522,500.00 $ $1,917,500.00 44.45% $277,812.50 120 $3,000,000.00 $1,860,000.00 522,500.00 $2,382,500.00 7.41% $46,312.50 - 0 1 - 20 21 Basic Financial Data 22 Units (students) 23 Revenue 24 Variable costs (VC * #students) 25 Fixed costs 26 Total cost 27 MACRS percent 28 Depreciation 29 30 Calculate OCF 31 Revenue 32 - Total cost 33 - Depreciation 34 = EBIT 35 - taxes 36 = Net income 37 + Depreciation 38 = OCF 39 40 Calculate cash flow 41 OCF 42 CF from change in NWC 43 (after tax) Capital cash flows 44 Opportunity cost 45 Total cash flow (CFFA) 46 PV of total cash flow 1-4 47 NPV $1,875,000.00 $1,685,000.00 $208,312.50 ($18,312.50) ($3,845.63) ($14,466.88) $208,312.50 $193,845.63 2 $2,250,000.00 $1,917,500.00 $277,812.50 $54,687.50 $11,484.38 $43,203.13 $277,812.50 $321,015.63 3 $2,625,000.00 $2,150,000.00 $92,562.50 $382,437.50 $80,311.88 $302,125.63 $92,562.50 $394,688.13 4 $3,000,000.00 $2,382,500.00 $46,312.50 $571,187.50 $119,949.38 $451,238.13 $46,312.50 $497,550.63 - - 0 1 $193,845.63 2 2 $321,015.63 3 $394,688.13 4 $497,550.63 70,000.00 $237,000.00 $ S(70,000.00) ($625,000.00) $ (495,000.00) ($1,190,000.00) $193,845.63 $177,027.97 $321,015.63 $267,730.55 $394,688.13 $300,615.73 $804,550.63 $559,624.73 $114,998.98 13.00% 48 IRR