Team 9A

Dorehn Coleman

Yuhan Pan

Nadia Iqbal

Meghan Thomas

John Ruch

Zhan Yuan

Harris Seafoods
Given the information available in the case, how would you calculate/estimate the cash flows
that we need to discount? Depreciation has already been estimated, but what about capital
expenditures (and sales) and changes in working capital?

We used capital expenditure of 7 million as mentioned in the case and changes in NWC calculated below
Cash

450

290

704

927

1,046

1,181

1,333

2,416

5,862

7,719

8,710

9,834

11,101

2,485

5,063

9,810

12,918

14,575

16,457

18,577

Other current assets

580

1,408

1,853

2,091

2,361

2,665

Total current assets

$2,935

$8,348

$17,784

$23,417

$26,422

$29,834

$33,677

2609.91

6333.84

8340.21

9410.13

10625.31

11994.03

$2,935

$5,738

$11,450

$15,077

$17,012

$19,209

$21,683

$2,803

$5,712

$3,627

$1,935

$2,197

$2,474

Accounts receivable
Inventories

Current Liabilities (9% of sales)

Working Capital
Increase in NWC

Revenues

1980

1981

1982

1983

1984

1985

1986

$0

$28,999

$70,376

$92,669

$104,557

$118,059

$133,267

COGS

$0

$25,339

$57,708

$75,989

$85,737

$96,809

$109,279

Gross profit

$0

$3,660

$12,668

$16,680

$18,820

$21,251

$23,988

3,190

7,741

8,804

9,933

11,216

12,660

833

787

758

746

748

764

-$363

$4,139

$7,119

$8,141

$9,287

$10,564

1987

3417

3908

4458

5071

-363

2152

3702

4233

4829

5493

833

787

758

746

748

764

$2,803

$5,712

$3,627

$1,935

$2,197

$2,474

-7000

-$2,333

-$2,773

$833

$3,044

$3,380

$3,783

SG&A
Depreciation
EBIT

$0

TAXES(48%)
NOPAT
Depreciation
CapEx
Increase in NWC
FCF

-7000

NPV
IRR

-$6,294.09
-2.13%

Using the criteria for NPV we should not go ahead with this project.

Although the various estimates for the project end in 1986, the project will not be over by
then. How would you account for this fact in your valuation? That is, can you think of
methods that could be used to value the project past 1986?

We assign a terminal value to the project at the end of year 1986 or year 6. The terminal value represents
the market value of all free cash flows after year 6. To calculate this value we will need the rate of growth
of the free cash flows or we can use multiples/ comparables approach where we use compare ratios
against another company.