Assumptions

SUNK COSTS
R&D
Test Marketing Costs

10,000,000
5,000,000

Time Line

4 yrs
INITIAL INVESMENTS

Production Equipment
Residual Val on Equipment
Working Capital

140,000,000
54,000,000
9,000,000
RATES

INFLATION
SALES PRICE INCREASE %
VARIABLE COST INCREASE %
M & GA COST INCREASE %
TAX RATE
DISCOUNT RATE
OEM PRODUCTION GROWTH RT
REPLACEMENT PRODUCTION GROWTH RT
WORKING CAPITAL REQUIREMENTS
OEM MARKET STATS
SuperTread Unit Sales Price
SuperTread Unit Variable Cost
Market Production for YR 1
GOODWEEK Market Share

3.25%
1.00%
1.00%
3.25%
40.00%
15.90%
2.50%
2.00%
15.00%

38
22
5,600,000
11.00%

REPLACEMENT MARKET STATS

SuperTread Unit Sales Price
Market Production for YR 1
GOODWEEK Market Share

59
14,000,000
8.00%

YEAR ONE EXPENSES

MARKETING & GENERAL ADMIN

26,000,000

DEPRECIATION TABLE
Recovery YR
0
1
2
3
4
5
6
7
8

Beginning Bal

Depreciation Rate

140,000,000
119,994,000
85,708,000
61,222,000
43,736,000
31,234,000
18,746,000
6,244,000

14.29%
24.49%
17.49%
12.49%
8.93%
8.92%
8.93%
4.46%

Model

Time
CASH FLOW NEEDS
EQUIPMENT
NET WORKING CAPITAL

(140,000,000)
(9,000,000)
(149,000,000)

N/A
23,956,800
14,956,800

REVENUES
OEM Market
Replacement Market

93,632,000
66,080,000

Total

159,712,000

EXPENSES
VC - OEM Market
VC - Replacement Market
Total

54,208,000
24,640,000
78,848,000

GROSS PROFIT

80,864,000

MARKETING & GENERAL ADMIN

DEPRECIATION
Total

26,000,000
0
26,000,000

EBIT

54,864,000

CAPITAL GAINS

PRE-TAX INCOME

54,864,000

TAXES

21,945,600

NET INCOME

32,918,400

CASH FLOW
NET INCOME
plus: DEPRECIATION
less: CAPITAL GAINS
less: CHNG in NET WORKING CAPITAL
less: CHNG in CAPITAL EXPENDITURES
TOTAL CASH FLOWS

(149,000,000)

32,918,400
0
0
(14,956,800)
0
17,961,600

PV OF CASH FLOWS

(149,000,000)

15,497,498

Calculations

CALCULATION

AMOUNT

NPV
PAYBACK PERIOD

$0.00
#DIV/0!

DISCOUNTED PAYBACK PERIOD

Greater than 4 yrs

IRR

#NUM!

PROFITABILITY INDEX

#DIV/0!

PROFITABILITY INDEX

#DIV/0!

TION TABLE
Depreciation Amt Ending Bal
140,000,000
20,006,000 119,994,000
34,286,000 85,708,000
24,486,000 61,222,000
17,486,000 43,736,000
12,502,000 31,234,000
12,488,000 18,746,000
12,502,000
6,244,000
6,244,000
0

N/A
25,547,672

N/A
27,244,345

N/A

1,590,872

1,696,673

1,809,521

100,051,644 106,911,435
70,266,168 74,717,530

114,241,550
79,450,885

29,053,865

170,317,812 181,628,965

193,692,435

57,924,636
26,200,944
84,125,580

61,896,094
27,860,774
89,756,868

66,139,845
29,625,754
95,765,599

86,192,232

91,872,097

97,926,837

26,845,000
0
26,845,000

28,618,280
0
28,618,280

31,500,229
0
31,500,229

59,347,232

63,253,817

66,426,608

10,264,000

59,347,232

63,253,817

76,690,608

23,738,893

25,301,527

30,676,243

35,608,339

37,952,290

35,750,365

35,608,339
0
0
(1,590,872)
0
34,017,467

37,952,290
0
0
(1,696,673)
0
36,255,617

35,750,365
0
(10,264,000)
(1,809,521)
54,000,000
77,676,844

25,324,163

23,287,614

43,048,481

DESCRIPTION
As the NPV is Negative, reject the project
Based on Payback, the Project would be accepted

Since the project takes longer than 4 yrs on a discounted basis, reject project
Since IRR is less than the 15.90% discount/hurdle rate, reject the project
Since the PI is less than 1, reject the project
Since the PI is less than 1, reject the project

DEPRECIATION TABLE
Recovery YR
0
1
2
3
4
5
6
7
8

Beginning Bal

Depreciation Rate

Depreciation Amt

140,000,000
119,994,000
85,708,000
61,222,000
43,736,000
31,234,000
18,746,000
6,244,000

14.29%
24.49%
17.49%
12.49%
8.93%
8.92%
8.93%
4.46%

20,006,000
34,286,000
24,486,000
17,486,000
12,502,000
12,488,000
12,502,000
6,244,000

Ending Bal
140,000,000
119,994,000
85,708,000
61,222,000
43,736,000
31,234,000
18,746,000
6,244,000
0