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Assuming that? Ideko's market share after 2005 will increase each? year, the required production volume for the following five years are shown? here
Sales Data
Growth/Year
2005
2006
2007
2008
2009
2010
Market Size (000 units)
4.80%
9,900.00
10,375.20
10,873.20
11,395.10
11,942.10
12,515.30
Market Share
0.65%
10.30%
10.95%
11.60%
12.25%
12.90%
13.55%
Production Volume (000 units)
1,019.70
1,136.10
1,261.30
1,395.90
1,540.50
1,695.80
Ideko's production plant will require an expansion in 2010 ?(when production volume will exceed the current level by 50%?), and the cost of this expansion will be $15.4 million. Assuming the financing of the expansion will be delayed? accordingly, calculate the projected interest payments and the amount of the projected interest tax shields? (assuming that the interest rates on the term loans is 6.5%?) through 2010. Consider an income tax rate of 35%. ?Ideko's balance sheet for 2005 is shown here
Estimated 2005 Balance Sheet Data for Ideko Corporation
Balance Sheet ($ 000)
Assets
Cash and Equivalents
6164
Accounts Receivable
18493
Inventories
6165
Total Current Assets
30822
Property, Plant, and Equipment
49500
Goodwill
72332
Total Assets
152654
Liabilities and Stockholders' Equity
Accounts Payable
4654
Debt
107600
Total Liabilities
112254
Stockholders' Equity
40400
Total Liabilities and Equity
Debt and Interest ($000) 2005 2006 2007 2008 2009 2010
Outstanding Debt ? ? ? ? ? ?
Interest on Term Loan 6.5% ? ? ? ? ? ?
Interest Tax Shield N/A ? ? ? ? ?
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