Determine annual depreciation by assuming dell depreciates

Assignment Help Financial Accounting
Reference no: EM131354611

1. Obtain Dell's financial statements. (If you really worked for Dell you would already have this data, but at least you won't get fired if your analysis is off target.) Down load the annual income statements, balance sheets, and cash flow statements for the last fiscal years from Yahoo! Finance (finance.yahoo.com). Enter Dell's ticker symbol and then go to ``financials."

2. You are now ready to estimate the Free Cash Flow for the new product. Compute the Free Cash Flow for each year:

Free Cash Flow=(Revenues-Costs-Depreciation) x(1-T) + Depreciation-Capital Expenditure-Change in Net Working Capital

Set up the timeline and computation of free cash flow in separate, contigous columns for each year of the project life. Be sure to make outflows negative and inflows positive.

a. Assume that the project's profitability will be similar to Dell's existing projects in 2012 and estimate (revenues-costs) each year by using the 2012 EBITDA/Sales profit margin. Calculate EBITDA as EBIT + Depreciation expense from the cash flow statement.

b. Determine the annual depreciation by assuming Dell depreciates thes assets by straight-line method over a 5-year life.

c. Determine Dell's tax rate by using the income tax rate in 2012.

d. Calculate the net working capital required rach year by assuming that the level of Net working capital will be a constant percentage of the project's sales. Use Dell's 2012 net working capital/sales to estimate the required percentage. (Use only accounts receivable, accounts payable, and inventory to measure working capital. other components of current assets and liabilities are harder to interpret and not necessarily reflective of the project's required net woking capital- for example, Dell's cash holdings.)

e. To determine the free cash flow, deduct the additional investment and the change in net working capital each year.

3. Use Excel to determine the NPV of the project with a 12% cost of capital. Also calculate the IRR of the project using Excel's IRR function.

4.Perform a sensitivity analysis by varying the project forecasts as follows:

a. Suppose first year sales will equal 2%-4% of Dell's revenues.

b. Suppose the cost of capital is 10%-15%.

c. Suppose revenue growth is constant after the first year at a rate of 0%-10%.

Reference no: EM131354611

Questions Cloud

What is the smallest expected loss for this portfolio : You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 12 percent and 16 percent, respectively. The standard deviations of the assets are 36 percent and 44 percent, respectively. What is the smalle..
Digital assistants in healthcare the pros and cons : Personal Digital Assistants in healthcare the pros and cons
Calculate the wacc if the tax rate : ABC Company has raised $150 million by issuing bonds, $50 million by issuing preferred stock and another $50 million by issuing common stock. The cost of debt is 6%, the cost of preferred stock is 8% and the cost of common stock is 10%. Calculate the..
Dynamic pricing strategies and impact on profit : Consider dynamic pricing strategies and their impact on profit, explain why dynamic pricing provides significant profit benefit over (the best) price strategy as: a. Available cpacity decreases, b. demand uncertainty increases, c. seasonality in dema..
Determine annual depreciation by assuming dell depreciates : Determine the annual depreciation by assuming Dell depreciates thes assets by straight-line method over a 5-year life. Determine Dell's tax rate by using the income tax rate in 2012.
Dynamic pricing strategies and their impact on profit : Consider dynamic pricing strategies and their impact on profit, explain why dynamic pricing provides significant profit benefit over (the best) price strategy as: a. Available cpacity decreases, b. demand uncertainty increases, c. seasonality in dema..
Present value-make single investment : Present value) Sarah Wiggum would like to make a single investment and have ?$2.12.1 million at the time of her retirement in 3030 years. She has found a mutual fund that will earn 55 percent annually. How much will Sarah have to invest? today? If Sa..
About to have the interest rate increased : Lucy is feeling crabby. Her adjustable rate mortgage is about to have the interest rate increased. She is exactly five years into her loan. She is offered two alternatives by her mortgage company; either pay the higher interest rate for the remaining..
Why women are more likely than men to develop depression : PSYC345- What factors help to explain why women are more likely than men to develop depression? What are some of the common myths about sexual harassment, rape, and abuse? What do these myths reveal about society's attitudes towards men ..

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd