FIN 4453 Project 3: Goodweek Tires, Inc. #VALUE! Enter group # and member names here: Group #:
Member #1:
Assumptions: Member #2:
R&D expense $10,000,000 Member #3:
Test marketing expense $5,000,000 Member #4:
Investment in equipment $185,000,000 Member #5:
Salvage value at end of year 4 $75,000,000
# of tires per car sold for OEM market 4
Time of project in years 4 Depreciation Schedule:
Depreciation rates for 7-year MACRS Year Depreciation Ending Book Value
year 1 14.30% 1 26,455,000 158,545,000
year 2 24.50% 2 45,325,000 113,220,000
year 3 17.50% 3 32,375,000 80,845,000
year 4 12.50% 4 23,125,000 57,720,000
OEM Market:
Sales
Automobile production (note: each car has 4 tires) 8,500,000
Goodweek market share 11.00%
Sales growth rate 2.50%
Price $43.00
Replacement market:
Sales
Total market sales 35,000,000
Goodweek market share 8.00%
Sales growth rate 2.00%
Price $64.00
Variable cost $31.00
Growth rate of prices & variable costs 4.25%
Fixed Costs (SG&A) $53,000,000
Growth rate of SG&A 3.25%
Tax rate 23.00%
Inflation 3.25%
Discount Rate 13.40%
NWC in year 0 $10,000,000
NWC in years 1-3 as % of sales 15.00%
Year 0 1 2 3 4
Sales
OEM Market:
Units (grow at 2.5%) 3,740,000 3,833,500 3,929,338 4,027,571
Price (grows at 4.25%) $43.00 $44.83 $46.73 $48.72
Total Sales OEM Market 160,820,000 171,846,221 $183,628,428 $196,218,452
Replacement Market:
Units (grow at 2%) 2,800,000 2,856,000 2,913,120 2,971,382
, Price (grows at 4.25%) $64.00 $66.72 $69.56 $72.51
Total Sales Replacement Market $179,200,000 $190,552,320 $202,623,809 $215,460,028
Total Sales $340,020,000 $362,398,541 $386,252,237 $411,678,480
- Variable costs
Units (OEM + Replacement) 6,540,000 $6,689,500 $6,842,458 $6,998,953
Costs per unit (grow at 4.25%) $31.00 $32.32 $33.69 $35.12
Total variable cost $202,740,000 $216,187,916 $230,529,193 $245,823,265
- Fixed costs (SG&A) (grow at 3.25%) $53,000,000 $55,252,500.00 $57,600,731.25 $60,048,762.33
- Depreciation $26,455,000 $45,325,000 $32,375,000 $23,125,000
EBIT $57,825,000 $45,633,125 $65,747,313 $82,681,452
-Taxes $13,299,750 $10,495,619 $15,121,882 $19,016,734
Net Income $44,525,250 $35,137,506 $50,625,431 $63,664,718
OCF (=EBIT+dep-tax) $70,980,250 $80,462,506 $83,000,431 $86,789,718
NWC $10,000,000 $51,003,000 $54,359,781 $57,937,836 $0
change in NWC $10,000,000 $41,003,000 $3,356,781 $3,578,054 -$57,937,836
Year 0 1 2 3 4
CF from Assets: 75,000,000.00
Operating CF 70,980,250.00 80,462,506.25 83,000,431.12 86,789,718.22
-Change in NWC -10,000,000.00 -41,003,000.00 -3,356,781.19 -3,578,054.40 57,937,835.59
-Capital Spending -185,000,000.00 0.00 0.00 0.00 0.00
CF from Assets -195,000,000.00 29,977,250.00 77,105,725.06 79,422,376.72 219,727,553.81
Year 0 1 2 3 4
Cumulative non-discounted CF -195,000,000.00 -165,022,750.00 -87,917,024.94 -8,494,648.21 211,232,905.60
Discounted CF -195,000,000.00 26,434,964.73 59,959,847.04 54,463,270.32 132,871,642.19
Cumulative discounted CF -195,000,000.00 -168,565,035.27 -108,605,188.23 -54,141,917.91 78,729,724.28
NPV $78,729,724.28
IRR 26.92%
Payback 3.04
Discounted Payback 3.41
PI 1.40
Accept? YES
Member #1:
Assumptions: Member #2:
R&D expense $10,000,000 Member #3:
Test marketing expense $5,000,000 Member #4:
Investment in equipment $185,000,000 Member #5:
Salvage value at end of year 4 $75,000,000
# of tires per car sold for OEM market 4
Time of project in years 4 Depreciation Schedule:
Depreciation rates for 7-year MACRS Year Depreciation Ending Book Value
year 1 14.30% 1 26,455,000 158,545,000
year 2 24.50% 2 45,325,000 113,220,000
year 3 17.50% 3 32,375,000 80,845,000
year 4 12.50% 4 23,125,000 57,720,000
OEM Market:
Sales
Automobile production (note: each car has 4 tires) 8,500,000
Goodweek market share 11.00%
Sales growth rate 2.50%
Price $43.00
Replacement market:
Sales
Total market sales 35,000,000
Goodweek market share 8.00%
Sales growth rate 2.00%
Price $64.00
Variable cost $31.00
Growth rate of prices & variable costs 4.25%
Fixed Costs (SG&A) $53,000,000
Growth rate of SG&A 3.25%
Tax rate 23.00%
Inflation 3.25%
Discount Rate 13.40%
NWC in year 0 $10,000,000
NWC in years 1-3 as % of sales 15.00%
Year 0 1 2 3 4
Sales
OEM Market:
Units (grow at 2.5%) 3,740,000 3,833,500 3,929,338 4,027,571
Price (grows at 4.25%) $43.00 $44.83 $46.73 $48.72
Total Sales OEM Market 160,820,000 171,846,221 $183,628,428 $196,218,452
Replacement Market:
Units (grow at 2%) 2,800,000 2,856,000 2,913,120 2,971,382
, Price (grows at 4.25%) $64.00 $66.72 $69.56 $72.51
Total Sales Replacement Market $179,200,000 $190,552,320 $202,623,809 $215,460,028
Total Sales $340,020,000 $362,398,541 $386,252,237 $411,678,480
- Variable costs
Units (OEM + Replacement) 6,540,000 $6,689,500 $6,842,458 $6,998,953
Costs per unit (grow at 4.25%) $31.00 $32.32 $33.69 $35.12
Total variable cost $202,740,000 $216,187,916 $230,529,193 $245,823,265
- Fixed costs (SG&A) (grow at 3.25%) $53,000,000 $55,252,500.00 $57,600,731.25 $60,048,762.33
- Depreciation $26,455,000 $45,325,000 $32,375,000 $23,125,000
EBIT $57,825,000 $45,633,125 $65,747,313 $82,681,452
-Taxes $13,299,750 $10,495,619 $15,121,882 $19,016,734
Net Income $44,525,250 $35,137,506 $50,625,431 $63,664,718
OCF (=EBIT+dep-tax) $70,980,250 $80,462,506 $83,000,431 $86,789,718
NWC $10,000,000 $51,003,000 $54,359,781 $57,937,836 $0
change in NWC $10,000,000 $41,003,000 $3,356,781 $3,578,054 -$57,937,836
Year 0 1 2 3 4
CF from Assets: 75,000,000.00
Operating CF 70,980,250.00 80,462,506.25 83,000,431.12 86,789,718.22
-Change in NWC -10,000,000.00 -41,003,000.00 -3,356,781.19 -3,578,054.40 57,937,835.59
-Capital Spending -185,000,000.00 0.00 0.00 0.00 0.00
CF from Assets -195,000,000.00 29,977,250.00 77,105,725.06 79,422,376.72 219,727,553.81
Year 0 1 2 3 4
Cumulative non-discounted CF -195,000,000.00 -165,022,750.00 -87,917,024.94 -8,494,648.21 211,232,905.60
Discounted CF -195,000,000.00 26,434,964.73 59,959,847.04 54,463,270.32 132,871,642.19
Cumulative discounted CF -195,000,000.00 -168,565,035.27 -108,605,188.23 -54,141,917.91 78,729,724.28
NPV $78,729,724.28
IRR 26.92%
Payback 3.04
Discounted Payback 3.41
PI 1.40
Accept? YES
