Incremental/ Purpose (Setup Setup Type (If Type of Cos (One

Cost Item
Sunk /Operation / Shutdown) Exist) Time / Frequesnt)
Feasibility Stusdy Sunk
Frequent
Forecasted Sales Incremental Operation - 26 M/ Year
4 Years
Frequent
Production Cost Incremental Operation - 11 M/ Year
4 Years
One Time
Engineering Cost Incremental Setup Opex
10 M
One Time
Design Cost Incremental Setup Opex
5M
Equipment Cost Life Time One Time
Incremental Setup Capex
of 5 Years 7.5 M
Frequent
Depreciation Cost
(Machines and Equipemnt) 1.5 M / Year
Incremental Operation -
= Cost of machine /
Technical Life 5 Years

Frequent
Marketing and Support Incremental Operation - 2.8 M / Year
4 Years
 Linksys Project
Cash Flow Layout
T0 T1 T2 T3 T4
Forecasted Sales 0 26,000,000 26,000,000 26,000,000 26,000,000
Production Cost (COGS) 0 -11,000,000 -11,000,000 -11,000,000 -11,000,000
Gross Profit 0 15,000,000 15,000,000 15,000,000 15,000,000
Depreciation Cost 0 -1,500,000 -1,500,000 -1,500,000 -1,500,000
Marketing and Support 0 -2,800,000 -2,800,000 -2,800,000 -2,800,000
Engineering Cost -10,000,000 0 0 0 0
Design Cost -5,000,000 0 0 0 0
EBIT (Earnings Before -15,000,000 10,700,000 10,700,000 10,700,000 10,700,000
Interest and Tax)
 T5
0
0
0
-1,500,000
0
0
0

-1,500,000
 Purpose
Type of Cos
Incremental/ (Setup Setup Type (If
Cost Item (One Time /
Sunk /Operation / Exist)
Frequesnt)
Shutdown)

Frequent
200,000 / Year
Forecasted Sales Incremental Operations -
3 Years

Frequent

Operations & 12,000 / Year

Production Incremental Operations -

3 Years

Frequent

Initial Equipment 30,000 / Year

Incremental Operations -
Depreciation

Initiation = Setup 3 Years

One Time
Equipment Incremental Setup Capex
90,000
Capex will be calculated later.
 Shark Attraction Project

Cash Flow Layout

T0 T1 T2 T3
Forecasted Sales
(50,000 Cans / Year) * 0 200,000 200,000 200,000
4$

Cost of Goods Sold)

COGS ( 50,000 Cans/ 0 -125,000 -125,000 -125,000
Year * 2.5 $)
Gross Profit 0 75000 75000 75000

Fixed Costs 0 -12,000 -12,000 -12,000

Depreciation 0 -30,000 -30,000 -30,000

EBIT (Earnings Before

0 33,000 33,000 33,000
Interest and Tax)

Income Tax 0 -11,220 -11,220 -11,220

Unlevered Net Income 0 21,780 21,780 21,780

9
 Incremental/ Purpose (Setup /Operation Setup Type (If Type of Cos (One Time
Cost Item
Sunk / Shutdown) Exist) / Frequesnt)

Frequent
9 M First Year
Forecasted Sales Incremental Operation - 7 M Next Year

2 M First Year
2 M Next Year
Marketing Incremental Operation
Planned to be spent during the same year of selling,
so it is not initiation expenses, it is operational expenses. - One Time 5 M

Gross Profit of Mini Munch = 0.35 * Forecasted Sales for Each Year
Gross Profit First Year (Mini Munch) = 3,150,000
Gross Profit Second Year (Mini Munch) = 2,450,000
Gross Profit of Other Products = 0.25* Forecasted Sales for Each Year
Gross Profit First Year (Other Products) = 500,000
Gross Profit Second Year (Other Products) = 500,000
 KFC (Mini Munch) Advertising Compaign
Project
Cash Flow Layout
T1 T2
Mini Munch
Sales Forecasted Sales 11,000,000 9,000,000

Other Products COGS -7,350,000 -6,050,000

Sales Gross Profit 3,650,000 2,950,000
Marketing -5,000,000 0
EBIT -1,350,000 2,950,000
Income Tax 472500 -1032500
Unlevered Net Income -877,500 1,917,500
 HP Hyper 500 High Speed Printer C
Case A:
Current Year Forecasted Sales @ Unit price $350 = 350 * 20,000 = 7 M
Dropping price to 300 & Selling Volume = 300 * 25,000 = 7.5 M
COGS / Unit = $200
What is the incremental Impact on EBIT SUCH AS A PRICE DROP ?

EBIT Will be d

HP Hyper 500 High Speed Printer C

Case B: Before Dropping Price
@ Printer Price = 350 & Printers Selling Volume = 350 * 20,000 = 7 M ,
Total COGS = $ 4M

Case B: After Dropping Price

Forecasted Sales of Printers/ Year = 300 * 25,000 = 7.5 M
Forecasted Sales Cartiges/ Year = 75 * 25000 = 1.875 M
Total Forecasted Sales =9M

COGS of production for Printers = 200 * 25,000 = 5,000,000 * EBIT Will be increased By $475,000 /
COGS of production for Cartiges = 21 * 25,000 = 525,000 * EBIT Will be increased By $1,425,000
Total COGS Collected = 5,525,000
per 500 High Speed Printer Case A
Before Price Dropping After Price Dropping
Forecasted Sales Before Price Dropping 7,000,000 Forecasted Sales After Price Dropping
COGS Before Price Dropping -4,000,000 COGS After Price Dropping
Gross Profit Before Price Dropping 3,000,000 Gross Profit After Price Dropping
EBIT Before Price Dropping 3,000,000 EBIT After Price Dropping

EBIT Will be decreased By $500,000

per 500 High Speed Printer Case B

Before Price Dropping
Forecasted Sales Before Price Dropping 7,000,000
COGS Before Price Dropping -4,000,000
Gross Profit Before Price Dropping 3,000,000
EBIT Before Price Dropping 3,000,000
After Price Dropping
Forecasted Sales After Price Dropping
COGS After Price Dropping
Gross Profit After Price Dropping
EBIT After Price Dropping

* EBIT Will be increased By $475,000 / Year

* EBIT Will be increased By $1,425,000 in the next 3 Years once price dropped
opping
7,500,000
-5,000,000
2,500,000
2,500,000

000

opping
9,000,000
-5,525,000
3,475,000
3,475,000

price dropped