bus_401_week_5__final_assignment

Apr 8th, 2015
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American Public University System
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Hi there.This document contains A+ work for the course BUS 401.I am sure that this work will not disappoint you.This document will give you the correct answers to the respective questions about the particular course.

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Mini CasePrinciples of FinanceNameBUS 401Datea)We focus on free cash flows rather than accounting profits because these are the flows that the firm receives and cflows are we able to correctly analyze the timing of the benefit or cost. Also, we are only interested in these cash fthose flows are available to the shareholder. In addition, it is only the incremental cash flows that interest us, becapoint of the company as a whole, the incremental cash flows are the marginal benefits from the project and, as sucfrom accepting the project.b)Although depreciation is not a cash flow item, it does affect the level of the differential cash flows over the projectDepreciation is an expense item and, the more depreciation incurred, the larger are expenses. Thus, accounting prtaxes which are a cash flow item.c)When evaluating a capital budgeting proposal, sunk costs are ignored. We are interested in only the incremental aflows, to the company as a whole. Regardless of the decision made on the investment at hand, the sunk costs willthese are not incremental cash flows. Hence, they are irrelevant.d), e), f)Section I. Calculate the change in EBIT, Taxes, and Depreciation (this become an input in the calculation of OperaYear0Units SoldSale PriceSales RevenueLess: Variable Costs @180Less: Fixed CostsEBDITLess: DepreciationEBITTax @34%170,000$3002120,000$300$21,000,000$12,600,000$200,000$8,200,000$1,600,000$6,600,000$2,244,000$36,000,0

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