The following information relates to "Company A" a giant in manufacturing heavy engineering equipment. The company is listed in the stock exchange. 2011 was a good year for the company with good cash profits in hand. With this additional cash, the company wants to grow inorganically and is planning to take over its supplier, Mitsui engineering. At the same time, the company can also grow by expanding its equipment line. The detailed information about the growth alternatives are given below. To evaluate the projects, the company uses a discounting rate of 10%. The company does not accept any project with an IRR less than 20%.

Since the company has generated significant cash in profits, it wants to utilize it optimally. So, after utilizing its cash for expansion, it now wants to increase its voting control. So, it wants touse $36,000 for buying back some of its outstanding shares. The current market price of the shares are $13.5, but on its buyback announcements, the share price rose to $15. The company has 10,000 shares outstanding.

The company expects a successful buyback program, after which it wants to pay dividends to the existing shareholders. In the previous year, it paid a dividend of $0.47 per share, this year it plans to pay $0.5 per share.

Since the company is capital intensive, it has a significant working capital requirements. So, out of the left over profits, the company wants to keep 60% of it for working capital requirements and the rest for contingency cash.

Calculate, the amount of profits in dollar terms that are used in investments, share buy back, dividend payments, working capital and contingency reserves.

Income Statements 31-Dec-10 31-Dec-11 Net sales $900,000 $945,000 Cost of goods sold -774000 -812700 Gross profit $126,000 $132,300 SG & A expenses Depreciation expenses -31500 -$33,100 Operating profits $94,500 $99,200 Extraordinary items 0 $0 Earnings before Interest & tax (EBIT) $94,500 $99,200 Net interest expense -8600 -$10,470 Earnings beforetax (EBT) $85,900 $88,730 Income tax expense (40%) -34360 -35492 Earnings after tax (EAT) $51,540 $53,238

Time of Cash Flow Expected CFs of Mitsui Engineering Expected cash flows of new product line Investment ($11,000) ($12,000.0) Year 1 $2,000 $4,000.0 Year 2 $3,000 $4,000.0 Year 3 $4,000 $4,000.0 Year 4 $5,000 $4,000.0 Year 5 $7,000 $4,000.0