This paper circulates around the core theme of Problem-1 PROBLEM 1 CR Oil is an integrated oil company. The following information is taken from together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.

Problem-1 PROBLEM 1 CR Oil is an integrated oil company. The following information is taken from its 1 answer below » Problem-1 PROBLEM 1 CR Oil is an integrated oil company. The following information is taken from its income statements for 2009 and 2010 (all dollar figures are in millions): 2009 Sales: $15,000; cost of goods sold: 50% of sales, depreciation: $500, CAPEX: $400, additional investment in net working capital: $150 2010 Sales: $16,000, cost of goods sold: 55% of sales, depreciation: $580, CAPEX: $250, additional investment in net working capital: $50 Applicable tax rate for the company is 35%. Calculate company’s free cash flows (FCF) for 2009 and 2010 Estimate company’s FCF for 2010-2014 using View complete question » Problem-1 PROBLEM 1 CR Oil is an integrated oil company. The following information is taken from its income statements for 2009 and 2010 (all dollar figures are in millions): 2009 Sales: $15,000; cost of goods sold: 50% of sales, depreciation: $500, CAPEX: $400, additional investment in net working capital: $150 2010 Sales: $16,000, cost of goods sold: 55% of sales, depreciation: $580, CAPEX: $250, additional investment in net working capital: $50 Applicable tax rate for the company is 35%. Calculate company’s free cash flows (FCF) for 2009 and 2010 Estimate company’s FCF for 2010-2014 using the following assumptions: Company’s sales will grow at 6% per year over the next five years; Cost of goods sold as a percentage of sales is expected to increase by 1% each year, i.e., the gro Document Preview: Problem-3

Problem-2

Problem-1

TaxRate

Solution

Given

Solution Legend

= Value given in problem

= Formula/Calculation/Analysis required

= Goal Seek or Solver cell

= Qualitative analysis or Short answer required

Debt Ratio (current)

Equity Ratio (current)

Cost of Debt

Market Risk Premium

Equity Beta

Debt Beta

Risk Free Rate

Corporate Tax Rate

Unlevered beta (current debt levels)

Revised Equity Beta

Cost of Equity

Revised WACC

PROBLEM 1

Sales

Cost of Goods Sold (% of sales)

Depreciation

CAPEX

Tax Rate

Sales growth rate next 5 years

per year

COGS growth rate

of additional sales

Depreciation

Tax rate

Year

Cost of Goods Sold

EBIT

EBIT(1-T) = NOPAT

Plus: Depreciation Expense

Less: CAPEX

Less: Working Capital Investment

Firm Free Cash Flow

PROBLEM 2

Investment cost (today)

Year 1

years

Year 2

Salvage Value

of original cost

Year 3

Year 4

Labor cost savings per year

Required rate of return

Cash flow estimation

Investment

NOPAT

Plus: Depreciation

Cash from Salvage Value

FFCF

NPV

IRR

Analysis

b.

Remain as projected

Expected NPV:

c.

Old D/E

New D/E

a. Cost of Equity

b. WACC

c.

MACRS Depreciation:

Information for 2010-2014:

of CAPEX + last year level

Change in net working capital

Bonus question

Decrease

Proportion of Debt in the Project

Proportion of Equity in the Project

PROBLEM 3

Increase in Net Working Capital

Incremental EBITDA

Incremental EBIT

Less: Depreciation

Less: Taxes

Total

`

Percentage of Salvage Value

= Score (filled by professor)

CR Oil ($ figures in $ 000,000)

Annual raw material savings

Increased sales (per year)

Project Life

Will be 10% less than projected

Will be 30% less than projected

Will be 50% less than projected

i) Scenario: Increased sales will be 10% less than projected

ii) Scenario: Increased sales will be 30% less than projected

iii) Scenario: Increased sales will be 50% less than projected

Increased annual revenues

Annual labor cost… Attachments: Q..docx Q.-Attachment….xls View less » Sep 18 2015 11:32 AM