Chapter 6
Input area:
Land cost 4,000,000$
Aftertax land value 6,500,000$
Equipment 95,000,000$
Equipment salvage 60%
Contract sales/tons 500,000
Contract $/ton $86
Year 1 production 620,000
Year 2 production 680,000
Year 3 production 730,000
Year 4 production 590,000
Spot market $/ton $77
Variable cost/ton $31
Fixed costs $4,100,000
NWC percent 5%
Reclamation costs $2,700,000
Charitable expense $6,000,000
Tax rate 25%
Required return 12%
Year 1 depreciation 14.29%
Year 2 depreciation 24.49%
Year 3 depreciation 17.49%
Year 4 depreciation 12.49%
Output area:
Time 0 cash flow
Equipment (95,000,000)$
Land (6,500,000)
Bethesda Mining
Total 52,240,000$ 56,860,000$ 60,710,000$ 49,930,000$
Total cash flow 24,852,875$ 29,383,875$ 30,177,875$ 26,117,875$ (2,025,000)$ 1,500,000$
Book value 81,424,500$ 58,159,000$ 41,543,500$ 29,678,000$
Salvage MV 57,000,000$
BV 29,678,000
Taxes (6,830,500)
Chapter 6
Input area:
Replacement market:
Price 62$
Growth rate 2.00%
Year 2 depreciation 24.49%
Year 3 depreciation 17.49%
Year 4 depreciation 12.49%
Goodweek Tires, Inc.
Output area:
Nominal price increase 4.28%
Price 41.00$ 42.76$ 44.59$ 46.50$
Price 62.00$ 64.66$ 67.42$ 70.31$
Revenue:
OEM market 111,848,000$ 119,553,838$ 127,790,574$ 136,594,786$
Replacement market 158,720,000 168,827,528 179,578,718 191,014,560
Total 270,568,000$ 288,381,366$ 307,369,292$ 327,609,346$
Net income 39,541,040$ 31,777,654$ 53,614,365$ 71,354,041$
OCF 62,405,040$ 70,961,654$ 81,598,365$ 91,338,041$
New working capital:
Beginning 09,000,000$ 40,585,200$ 43,257,205$ 46,105,394$
Ending 9,000,000 40,585,200 43,257,205 46,105,394 –