Cash Flow Components

Volume in units
Annual growth in volume
Annual inflation (costs & revenue)
Price per unit
Revenue
Direct materials/unit
Conversion costs incl returns/unit
Cost of returns (figure) per pound
Conversion costs excl returns/unit
Total direct costs
Indirect costs
Depreciation
Operating Income
Tax rate
NOPAT
add back Depreciation
OCF
Reinvestment in operations (ST & LT)
FCF

Days in inventory
 BAU
currently = 500,000 pounds/wk x 52 wks, max =600k pounds/wk
2%
1%
$1.0235/pound
volume x price
$0.45/pound
$0.43/pound
0.077
0.353
DM+ConvCost+Cost of returns
7% of revenue
2MM straightline for 4 years = 500,000
Revenue - Dir Costs - Ind Costs - Depreciation
36% stated
OpInc*(1-t)
500,000
NOPAT+D&A
increase in inverntory (see below)
OCF-Reinvestment

30
Days in inventory = 365 / (COGS/Average Inventory)
Days*(COGS/AvgInv) = 365
COGS/AvgInv = 365/days
AvgInv/COGS = days/365
AvgInv = COGS*(days/365)
 Proposal
5% lower
2%
1%
10% higher :. 1.1*$1.0235 = 1.12585/pound
volume x price
$0.45/pound
0.407/pound
0.084
reduces $0.03/pound (maintenance & power) :. 0.323
DM+ConvCost+Cost of returns
7% of revenue
straightline for 10 years, salvage = 0
Revenue - Dir Costs - Ind Costs - Depreciation
36% stated
OpInc*(1-t)
825,000
NOPAT+D&A
increase in inverntory (see below)
OCF-Reinvestment

20