ESTIMATE OF VULCAN MOLD-MAKER ANNUAL CASH FLOWS

LABOR COST
SEMI AUTO LABOR
MAINTENANCE
FUEL
LABOR SAV
DEPRECIATION
PRETAX COSTS
TAXES
AFTER TAX COST
+ DEPREC
- CAP EXPEND
CASH FLOW

($813,296.00)

($38,170.00)
$0.00
($59,500.00)
($26,850.00)
$5,200.00
($126,250.00)
($245,570.00)
$105,595.00
($139,975.00)
$126,250.00
$0.00
($13,725.00)

($39,315.00)
$0.00
($61,285.00)
($27,656.00)
$5,356.00
($126,250.00)
($249,150.00)
$107,134.00
($142,016.00)
$126,250.00
$0.00
($15,766.00)

($40,494.00)
$0.00
($63,124.00)
($28,485.00)
$5,517.00
($126,250.00)
($252,836.00)
$108,720.00
($144,116.00)
$126,250.00
$0.00
($17,866.00)

ESTIMATE OF SEMI-AUTOMATED MACHINES ANNUAL CASH FLOWS

OPERATING LABOR
MAINTEN LABOR
MAINTEN SUPP
FUEL
DEPRECIATION
PRETAX COST
TAXES
AFTER TAX COST
+DEPRECIATION
-CAP EXPENDITURE
CASH FLOW

($295,546.00)
($39,564.00)
($4,000.00)
($12,300.00)
($47,521.00)
($398,931.00)
$171,540.00
($227,391.00)
$47,521.00
$0.00
($179,870.00)

($304,412.00)
($40,751.00)
($4,120.00)
($12,669.00)
($47,521.00)
($409,473.00)
$176,073.00
($233,400.00)
$47,521.00
$0.00
($185,879.00)

($313,544.00)
($41,973.00)
($4,244.00)
($13,049.00)
($47,521.00)
($420,331.00)
$180,742.00
($239,589.00)
$47,521.00
$0.00
($192,068.00)

($41,709.00)
$0.00
($65,017.00)
($29,340.00)
$5,682.00
($126,250.00)
($256,634.00)
$110,353.00
($146,281.00)
$126,250.00
$0.00
($20,031.00)

($42,960.00)
$0.00
($66,968.00)
($30,220.00)
$5,853.00
($126,250.00)
($260,545.00)
$112,034.00
($148,511.00)
$126,250.00
$0.00
($22,261.00)

($44,249.00)
$0.00
($68,977.00)
($31,127.00)
$6,028.00
($126,250.00)
($264,575.00)
$113,767.00
($150,808.00)
$126,250.00
$0.00
($24,558.00)

($45,576.00)
$0.00
($71,046.00)
($32,060.00)
$6,209.00
($126,250.00)
($268,723.00)
$115,551.00
($153,172.00)
$126,250.00
$0.00
($26,922.00)

($46,944.00)
$0.00
($73,177.00)
($33,022.00)
$6,395.00
($126,250.00)
($272,998.00)
$117,389.00
($155,609.00)
$126,250.00
$0.00
($29,359.00)

($322,951.00)
($43,233.00)
($4,371.00)
($13,441.00)
($47,521.00)
($431,517.00)
$185,552.00
($245,965.00)
$47,521.00
$0.00
($198,444.00)

($332,639.00)
($44,530.00)
($4,502.00)
($13,844.00)
($47,521.00)
($443,036.00)
$190,505.00
($252,531.00)
$47,521.00
$0.00
($205,010.00)

($342,618.00)
($45,866.00)
($4,637.00)
($14,259.00)
($47,521.00)
($454,901.00)
$195,607.00
($259,294.00)
$47,521.00
$0.00
($211,773.00)

($352,897.00)
($47,241.00)
($4,776.00)
($14,687.00)
$0.00
($419,601.00)
$180,429.00
($239,172.00)
$0.00
$0.00
($239,172.00)

($363,484.00)
($48,659.00)
($4,919.00)
($15,127.00)
($432,189.00)
$185,841.00
($246,348.00)
$0.00
$0.00
($246,348.00)

QUESTION 2 VULCAN CASH FLOW

0
LABOR COST
SEMI AUTO LABOR
MAINTENANCE
FUEL
LABOR SAV
DEPRECIATION
PRETAX COSTS
TAXES
AFTER TAX COST
+ DEPREC
- CAP EXPEND
CASH FLOW

($813,296.00)

($38,170.00)
$0.00
($59,500.00)
($26,850.00)
$5,200.00
($126,250.00)
($245,570.00)
$105,595.00
($139,975.00)
$126,250.00
$0.00
($13,725.00)

($38,170.00)
$0.00
($59,500.00)
($26,850.00)
$5,200.00
($126,250.00)
($245,570.00)
$105,595.00
($139,975.00)
$126,250.00
$0.00
($13,725.00)

($38,170.00)
$0.00
($59,500.00)
($26,850.00)
$5,200.00
($126,250.00)
($245,570.00)
$105,595.00
($139,975.00)
$126,250.00
$0.00
($13,725.00)

($295,546.00)
($39,564.00)
($4,000.00)
($12,300.00)
($47,521.00)
($398,931.00)
$171,540.00
($227,391.00)
$47,521.00
$0.00
($179,870.00)

($295,546.00)
($39,564.00)
($4,000.00)
($12,300.00)
($47,521.00)
($398,931.00)
$171,540.00
($227,391.00)
$47,521.00
$0.00
($179,870.00)

($295,546.00)
($39,564.00)
($4,000.00)
($12,300.00)
($47,521.00)
($398,931.00)
$171,540.00
($227,391.00)
$47,521.00
$0.00
($179,870.00)

QUESTION 3 SEMI AUTOMATED CASH FLOW

OPERATING LABOR
MAINTEN LABOR
MAINTEN SUPP
FUEL
DEPRECIATION
PRETAX COST
TAXES
AFTER TAX COST
+DEPRECIATION
-CAP EXPENDITURE
CASH FLOW

($38,170.00)
$0.00
($59,500.00)
($26,850.00)
$5,200.00
($126,250.00)
($245,570.00)
$105,595.00
($139,975.00)
$126,250.00
$0.00
($13,725.00)

($38,170.00)
$0.00
($59,500.00)
($26,850.00)
$5,200.00
($126,250.00)
($245,570.00)
$105,595.00
($139,975.00)
$126,250.00
$0.00
($13,725.00)

($295,546.00)
($39,564.00)
($4,000.00)
($12,300.00)
$0.00
($351,410.00)
$151,106.00
($200,304.00)
$0.00
$0.00
($200,304.00)

($295,546.00)
($39,564.00)
($4,000.00)
($12,300.00)
$0.00
($351,410.00)
$151,106.00
($200,304.00)
$0.00
$0.00
($200,304.00)

Fonderia Di Torino S.P.A.

Sales
Costs
Depreciation
EBIT
Tax(43%)
Net Income
Operating Cash Flow
Machine Costs
# employees
wage
hours
maintenance
# of equivalent employees
wage
hours
supplies
power
savings
days
costs

Old Machine
280,000,000
351409.6
47520
279,601,070
120228460.3
159,372,610
159,420,130
Old
24
7.33
8
188.4
3
7.85
8
4000
12300
0
210
351409.6

New Machine
280,000,000
119319.6
126,250
279,754,430
120294405.1
159,460,025
159,586,275
New
2
11.36
8
59500
0
0
0
0
26850
5200
210
119319.6

Book Value
Capital Loss= Resale value-Book value
Tax Savings=Capital Loss*Tax Rate
Capital Expenditure= Cost of New Machine-Resale Value of Old machine-savings in Tax

CASH FlOWS
CF0
CF1
CF2

-813298.25
166145
166145

CF3
CF4
CF5
CF6
CF7
CF8

166145
166145
166145
166145
166145
451270
Cost of Equity

WACC

Jaimini Patel
Sarah Fitzpatrick
Jessica Hicks

depreciation for new machine

126,250

-166,145
The New Machine would save
166,145 per year with the
current level of sales. It is a
positive Incremental Cash
Flow.

(415807-130682)
(130000-285125)
(155125*0.43)

285125
155125
66703.75
813296.25

Old machine-savings in Tax

Discount Rate
19%

18%
NPV
IRR
Profitability Index

-59976.96
15.84%
0.93

-85397.98
0.89

Payback Period

4.90

1984 assumption
Majority Shareholder assumption

14%
18%

Cost of Equity

WACC

12.80%

9.86%

Rate
17%
-33100.66
0.96

Cost of Equity = Rf + ( E(Rm) - Rf )

Risk Free Rate
Risk Premium
(Beta)

5.30%
6.00%
1.25

WACC = Re ( E/(D+E) ) + Rd (D/D+E) )*(1-T)

Debt Interest Rate

Tax Rate
Debt
Equity

6.80%
43.00%
33.0%
67.0%