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    This document contains two tables showing incremental earnings forecasts for 5 years. Table 1 shows sales remaining constant at $26,000 each year, with costs also remaining constant, resulting in stable EBIT and unlevered net income each year except for year 5 which shows a loss. Table 2 models a cannibalization effect, with sales reduced to $23,500, again with stable costs, but lower profits each year. It also includes inputs for production costs of a new product.

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    This document contains two tables showing incremental earnings forecasts for 5 years. Table 1 shows sales remaining constant at $26,000 each year, with costs also remaining constant, resulting in stable EBIT and unlevered net income each year except for year 5 which shows a loss. Table 2 models a cannibalization effect, with sales reduced to $23,500, again with stable costs, but lower profits each year. It also includes inputs for production costs of a new product.

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    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
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    9 views2 pages

    Home Net

    Uploaded by

    sandhu248
    This document contains two tables showing incremental earnings forecasts for 5 years. Table 1 shows sales remaining constant at $26,000 each year, with costs also remaining constant, resulting in stable EBIT and unlevered net income each year except for year 5 which shows a loss. Table 2 models a cannibalization effect, with sales reduced to $23,500, again with stable costs, but lower profits each year. It also includes inputs for production costs of a new product.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    Table 1

    Incremental Earnings Forecast 0 1 2 3 4 5


    Sales 26000 26000 26000 26000
    COGS 11000 11000 11000 11000
    Gross profit 15000 15000 15000 15000
    Selleng exp,general & admin 2800 2800 2800 2800
    R&D 15000
    Depriciation 1500 1500 1500 1500 1500
    EBIT -15000 10700 10700 10700 10700 -1500
    Income tax @ 40% -6000 4280 4280 4280 4280 -600
    Unlevered net income -9000 6420 6420 6420 6420 -900
    Plus:Depreciation
    Cash flows
    Opportunity cost 1000 1000 1000 1000
    Net cash flows

    Table 2(Cannabilization)
    Incremental Earnings Forecast 0 1 2 3 4 5
    Sales 23500 23500 23500 23500
    COGS 9500 9500 9500 9500
    Gross profit 14000 14000 14000 14000
    Selleng exp,general & admin 3000 3000 3000 3000
    R&D 15000
    Depriciation 1500 1500 1500 1500 1500
    EBIT -15000 9500 9500 9500 9500 -1500
    Income tax @ 40% -6000 3800 3800 3800 3800 -600
    Unlevered net income -9000 5700 5700 5700 5700 -900
    Plus:Depreciation
    Cash flows
    Inputs
    Unit 1000
    sales 100000
    WP 260
    Production cost 110
    Selling Exp 2800000
    Design & engg. 5000000
    Software engg. 50
    Salary/engg. 200000
    Depreciation Straight line
    Lab equipment 7500000

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