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Problem-1 PROBLEM 1 CR Oil is an integrated oil company. The following information is taken from

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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


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