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Case Solution

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Accounting
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American InterContinental University
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Page 1 Joyce's Juice: Solution Case 1 - NPV Calculation Assumptions (Amounts in $ Thousands Unless Otherwise Indicated) Initial Capital Expenditure $ 9,000.00 Useful Life of Equipment 5 Annual Depreciation $ 1,800.00 Sales in Year 1 ######## Sales Growth through Year 6 6% Sales Growth Year 6 Onward 2% Free Cash Flow Year 6 Onward 2% Cost of Goods Sold (% of sales) 72% $ 5,000.00 Incremental SG&A Expense $ 500.00 Market Research Expense Initial Net Working Capital $ 6,000.00 15% Accounts Receivable % of Next Year Sales 20% Inventory % of Next Year COGS 15% Accounts Payable % of Next Year COGS $ 1,000.00 Interest Expense 30% Tax Rate 20% Cost of Capital Unlevered Income Statements Sales Year 0 Year 1 ######## ######## Year 2 ######## ######## Year 3 ######## ######## Year 4 ######## ######## Year 5 ######## ######## Year 6 ######## ######## Cost of Sales Gross Profit Selling, General & Administration Expense Depreciation Expense $ 8,400.00 $ 8,904.00 $ 9,438.24 ######## ######## ######## $(5,000.00) $(5,000.00) $(5,000.00) $(5,000.00) $(5,000.00) $(5,000.00) $(1,800.00) $(1,800.00) $(1,800.00) $(1,800.00) $(1,800.00) $(1,800.00) EBIT $ 1,600.00 $ 2,104.00 $ 2,638.24 $ 3,204.53 $ 3,804.81 $ 4,441.09 Page 2 Joyce's Juice: Solution Taxes Unlevered Net Income Working Capital Calculations Inventory Accounts Receivable Accounts Payable NWC Level Change in NWC CF from Change in NWC Unlevered Cash Flows Unlevered Net Income Add Back: Depreciation CF from Change in ...
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