Create four-year cash flow projection

Assignment Help Financial Management

Reference no: EM132024311

ABC Corp. is a company with many billions of dollars in its capital base (Common + Debt + Preferred). As its Assistant Treasurer, you’ve been tasked with analyzing a new investment in equipment. You are to create a 4-year Cash Flow projection using these assumptions:

o A $2 million investment in equipment will be made immediately

o The project will end after 4 years

o Three years ago, ABC lost $1 million investing in a similar piece of equipment.

o The company will:

- incur working capital needs immediately of $50,000,

- make $350,000 of net income in year 1, which will grow by $100,000 each year,

- have $30,000 of annual depreciation (not increasing),

- finance it by withdrawing $2 million from the bank, currently earning 2% per year.

o The equipment will have an after-tax salvage value of $100,000 after 4 years.

Reference no: EM132024311

Questions Cloud

Government bond that pays interest semi-annually : Calculate the price of a 5-year $100,000 8% government bond that pays interest semi-annually, if the required market yield is 6% p.a. compounding semi-annually.

What is the standard deviation and expected return : What is the expected return? What is the variance? What is the standard deviation?

Find the current yield-capital gains yield and total return : Find the current yield, capital gains yield, and total return on January 1, 1997, given the price as determined in Part b.

What must the coupon rate be on bonds : The bonds make semiannual payments. What must the coupon rate be on the bonds?

Create four-year cash flow projection : ABC Corp. is a company with many billions of dollars in its capital base (Common + Debt + Preferred). You are to create a 4-year Cash Flow projection.

Clearly identify incremental operating cash flows : Develop the incremental cash flows for this replacement decision. Make sure to clearly identify incremental operating cash flows,

Create your own hypothetical capital budgeting project : Create your own hypothetical capital budgeting project.

Use the variable growth version of dividend valuation model : Use the variable growth version of the dividend valuation model and a required return of 15% to find the value of the stock.

Each plane model using the company wacc as the hurdle rate : Calculate the net present value (NPV) for each plane model using the company’s WACC as the hurdle rate.

User Account

All Pages