sales growth per year

sales 2012

sales 2013

assets (end of 2012)

assert growth per year

current liabilities
accounts payable
Consolidation Entries
D Cr Con
e e solid
bi di ated
t t Tota
ls

(2,1
80,0
00)

1,54
9,10
0

(630
,900
)
Cas 149,400
h 1 26
1 0,
1, 40
0 0
0
0
Rec 156,000
eiv 1 ( 1 29
abl 5 A 2, 5,
es 2, ) 6 40
an 0 0 0
d 0 0
Inv 0
ent
ory
Pro 2,
per 4( 1 2,
ty, 7A 8 84
Pla Assuming a payback period8, ) 4, 2, project B should be undertaken because it
of 2.5 years
nt 0 0 00
will be paid in a year and a half while project a should be rejected even though
an both have positive NPV 0and 0IRRs over0 the cost of capital because it fails the
d C payback period criteria 0 0
Eq
uip Cost of
me capital 5%
nt D
NPV $18,243,813.02
IRR 27%

If the cost of capital is 5% while both projects would be accaptable because both NPVS are
positive and because both IRRs are over the cost of capital, project A should be accepted
because it has the higher NPV and will maximize value

Cost of
capital 15%
E
NPV $8,207,071
IRR 27%
If the cost of capital is 5% while both projects would be accaptable because both NPVS are
positive and because both IRRs are over the cost of capital, project A should be accepted
because it has the higher NPV and will maximize value

F
Year Project A
0 $ (25,000,000)
1 $ 5,000,000
2 $ 10,000,000
3 $ 15,000,000
4 $ 20,000,000

G 21.93%
 MIRR

180,000
Inv 1,192,000
est ( 7
me S 4
nt ) 0,
in 0
Seg 0
uro 0
s

( 4 -
A5
) 2,
0
0
0
Res
ear ( 1 12
ch A2 9,
& ) 9, 00
De 0 0
vel 0
op 0
me
nt
Go
od ( 9 97
will A 7, ,0
) 0 00
0
0
Tra 372,000
de 2( 5 64
ma 2 A 4, 9,
rk 3, ) 6 60
0 0 0
0 0
0
Tot 4,049,400
al 9 5,
 Ass 6 01
ets 4, 3,
0 40
0 0
0

(1,0
16,0
00)

(630
,900
)

179,
000

(1,4
67,9
00)

260,
400
( 12,600
A) 295,
400
(
A 18 2,84
) 4, 2,00
00 0
0
( 740,000
S)
( 452,000
A) -
(
A 12 129,
) 9, 000
00
0
(
A 97 97,0
) ,0 00
00
(
A 54 649,
) ,6 600
00

5,01
3,40
0

(749
,000
)

notes payable

accrurals

after tax profit margin

payout ratio

Additional Funds Needed = Increase in Assets - Increase in Spontaneous Liabilities - Increase in Retained Earnin

AFN= (previous year assets)*sales growth rate- (last year liabillites*sales growth- sales of this year * after tax profit margin

The AFN in problem 2 is higher than the one found in problem 1 for several reasons. First, from a mathmatical presepectiv
funds than before becasue the requoired increase in assets that the comapny needs increased by 2,000,000 dollars. This