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  • Salida Salt Company State Rock Salt Contract Analysis Input Variables Basic Value Distribution

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    Akriti Shah
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    The document analyzes the cash flows of a proposed rock salt contract for Salida Salt Company over 5 years. It details input variables like the amount of salt produced annually and costs of equipment, operations, and taxes. The annual cash flows show revenues of $5 million per year from salt sales but costs of $3.76 million for variables and $500,000 for fixed costs. After taxes, the annual after-tax cash flow is $642,000 each year, resulting in a positive net present value and internal rate of return for the 5-year project.

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    Simulation

    Original Title

    Simulation 2015 Data Set

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    The document analyzes the cash flows of a proposed rock salt contract for Salida Salt Company over 5 years. It details input variables like the amount of salt produced annually and costs of equipment, operations, and taxes. The annual cash flows show revenues of $5 million per year from salt sales but costs of $3.76 million for variables and $500,000 for fixed costs. After taxes, the annual after-tax cash flow is $642,000 each year, resulting in a positive net present value and internal rate of return for the 5-year project.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    336 views2 pages

    Salida Salt Company State Rock Salt Contract Analysis Input Variables Basic Value Distribution

    Uploaded by

    Akriti Shah
    The document analyzes the cash flows of a proposed rock salt contract for Salida Salt Company over 5 years. It details input variables like the amount of salt produced annually and costs of equipment, operations, and taxes. The annual cash flows show revenues of $5 million per year from salt sales but costs of $3.76 million for variables and $500,000 for fixed costs. After taxes, the annual after-tax cash flow is $642,000 each year, resulting in a positive net present value and internal rate of return for the 5-year project.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 2

    Salida Salt Company

    State Rock Salt Contract Analysis


    Input Variables Basic Value Distribution
    Amount of Rock Salt per Year 40,000 Tons Triangular
    Revenue per Ton $ 125 No Change
    Cost of Equipment $ 2,300,000 No Change
    Life 5 No Change
    Depreciation Method (SLM) 5 No Change
    Fixed Cost $ 500,000 No Change
    Var Cost/Ton $ 94 Normal
    Total Var Cost $ 3,760,000 No Change
    Actual Salvage $ 150,000 Uniform
    Change in NWC $ 115,000 No Change
    Required Return 12% No Change
    Tax Rate 35% No Change

    Annual Cash Flows for Salida Salt Project


    Year 0 Year 1 Year 2 Year 3
    Initial Outlay $ 2,415,000
    Unit Sales 40,000 Tons 40,000 Tons 40,000 Tons
    Sales 5,000,000 5,000,000 5,000,000
    Variable Costs 3,760,000 3,760,000 3,760,000
    Fixed Costs 500,000 500,000 500,000
    Depreciation 460,000 460,000 460,000
    Taxable Cash Flows 280,000 280,000 280,000
    Taxes 98000 98000 98000
    Add: Depreciation 460,000 460,000 460,000
    Annual After-Tax Cash Flow 642,000 642,000 642,000
    Terminal Cash Flow
    Total Annual Cash Flows (2,415,000) 642,000 642,000 642,000

    Net Present Value


    Payback Period
    IRR
    MIRR
    ct
    Year 4 Year 5

    40,000 Tons 40,000 Tons


    5,000,000 5,000,000
    3,760,000 3,760,000
    500,000 500,000
    Don't make changes in this
    460,000 460,000 portion
    280,000 280,000
    98000 98000
    460,000 460,000
    642,000 642,000
    -
    642,000 642,000

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