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Social Science Clinic => Business => Finance => Topic started by: jayhills49 on Jul 9, 2019

Title: Use the table for the question(s) below.Year 0Year 1Year 2Year 3Revenues400,000400,000400,000-Cost ...
Post by: jayhills49 on Jul 9, 2019
Use the table for the question(s) below.

Year 0Year 1Year 2Year 3
Revenues400,000400,000400,000
-Cost of Goods Sold-180,000-180,000-180,000
​
-Depreciation-100,000-100,000-100,000
=EBIT120,000120,000120,000
​
-Taxes (35%)-42,000-42,000-42,000
=Unlevered net income78,00078,00078,000
​
+Depreciation100,000100,000100,000
​
-Additions to Net Working Capital-20,000-20,000-20,000
​
-Capital Expenditures-300,000
=Free Cash Flow158,000158,000158,000
​


Visby Rides, a livery car company, is considering buying some new luxury cars. After extensive research, they come up with the above estimates of free cash flow from this project. Visby learns that a competitor is thinking of offering similar services, thus reducing Visby's sales. By how much could sales fall before the net present value (NPV) was zero, given that the cost of capital is 10%, and that cost of goods sold is 45% of revenues?
◦ by 18%
◦ by 24%
◦ by 26%
◦ by 12%
Title: Use the table for the question(s) below.Year 0Year 1Year 2Year 3Revenues400,000400,000400,000-Cost ...
Post by: spencer.martell on Jul 9, 2019
by 26%
Title: Use the table for the question(s) below.Year 0Year 1Year 2Year 3Revenues400,000400,000400,000-Cost ...
Post by: jayhills49 on Jul 9, 2019
Thanks
Title: Use the table for the question(s) below.Year 0Year 1Year 2Year 3Revenues400,000400,000400,000-Cost ...
Post by: spencer.martell on Jul 9, 2019
Welcome :)
Title: Re: Use the table for the question(s) below.Year 0Year 1Year 2Year 3Revenues400,000400,000400,000-Co
Post by: Sam R on Apr 20, 2020
thank you
Title: Re: Use the table for the question(s) below.Year 0Year 1Year 2Year 3Revenues400,000400,000400,000-Co
Post by: K K on May 6, 2021
Thank you
Title: Re: Use the table for the question(s) below.Year 0Year 1Year 2Year 3Revenues400,000400,000400,000-Co
Post by: Zhen Yu on Jul 11, 2021
thankyou