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Copyright (C) 2001 by the Trustees of the University of Virginia Darden School Foundation.
Page 1
Model Facts
chool Foundation.
Page 2
Exhibit 2
UVA-F-1351
Assumptions
Annual Output (metric tons)
Output Gain/Original Output
Price/ton (pounds sterling)
Inflation Rate (prices and costs)
Gross Margin (ex. Deprec.)
Old Gross Margin
Tax Rate
Investment Outlay (mill.)
Energy Savings/Sales
Yr. 1-5
Yr. 6-10
Yr. 11-15
Year
Now
1. Estimate of Incremental Gross Profit
New Output (tons)
Lost Output--Construction
New Sales (Millions)
New Gross Margin
New Gross Profit
Old Output
Old Sales
Old Gross Profit
Incremental Gross Profit
2. Estimate of Incremental Depreciation
New Depreciation
3. Overhead
4. Prelim. Engineering Costs
5. Pretax Incremental Profit
6. Tax Expense
7. After-tax Profit
8. Cash Flow Adjustments
Less Capital Expenditures
Add back Depreciation
Less Added WIP inventory
After-tax Scrap Proceeds
8. Free Cash Flow
NPV =
IRR =
250,000
7.0%
541
0.0%
12.50%
11.5%
30.0%
9.00
1.25%
0.8%
0.0%
1
2001
Discount rate
Depreciable Life (years)
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods
Months Downtime, Construction
After-tax Scrap Proceeds
Preliminary Engineering Costs
2
2002
3
2003
250,000
135.25
15.55
3.62
250,000
135.25
15.55
2.54
250,000
135.25
15.55
2.54
250,000
135.25
15.55
2.54
250,000
135.25
15.55
2.54
250,000
135.25
15.55
2.54
1.20
0.32
0.50
-0.16
-0.05
1.04
0.32
0.90
0.32
0.78
0.32
0.68
0.32
0.59
0.32
0.51
0.32
0.44
0.32
0.38
0.32
0.33
0.32
0.43
0.32
0.43
0.32
0.43
0.32
0.43
0.32
0.43
0.32
2.99
0.90
3.13
0.94
3.25
0.97
3.35
1.01
2.72
0.82
2.80
0.84
2.87
0.86
2.92
0.88
2.98
0.89
1.79
0.54
1.79
0.54
1.79
0.54
1.79
0.54
1.79
0.54
-0.11
2.09
2.19
2.27
2.35
1.90
1.96
2.01
2.05
2.08
1.25
1.25
1.25
1.25
1.25
1.20
0.31
0.00
1.04
-0.47
0.90
0.00
0.78
0.00
0.68
0.00
0.59
0.00
0.51
0.00
0.44
0.00
0.38
0.00
0.33
0.00
0.43
0.00
0.43
0.00
0.43
0.00
0.43
0.00
0.43
0.00
1.40
2.66
3.09
3.06
3.02
2.49
2.47
2.45
2.43
2.41
1.68
1.68
1.68
1.68
1.68
144.72
12.5%
18.09
267,500
15
2015
250,000
135.25
15.55
3.62
144.72
12.5%
18.09
267,500
14
2014
250,000
135.25
15.55
3.62
144.72
12.5%
18.09
267,500
13
2013
250,000
135.25
15.55
3.62
144.72
13.3%
19.18
267,500
12
2012
250,000
135.25
15.55
3.62
144.72
13.3%
19.18
267,500
11
2011
250,000
135.25
15.55
4.34
144.72
13.3%
19.18
267,500
10
2010
250,000
135.25
15.55
4.34
144.72
13.3%
19.18
267,500
9
2009
250,000
135.25
15.55
4.34
144.72
13.3%
19.18
267,500
8
2008
250,000
135.25
15.55
4.34
144.72
13.8%
19.90
267,500
7
2007
250,000
135.25
15.55
1.86
144.72
13.8%
19.90
267,500
6
2006
267,500
144.72
13.8%
19.90
267,500
5
2005
267,500
(33,438)
126.63
13.8%
17.41
144.72
13.8%
19.90
267,500
4
2004
10.0%
15
3.5%
0
3.0%
1.5
0
0.5
144.72
12.5%
18.09
267,500
144.72
12.5%
18.09
-9.00
-9.00
9.00
25.9%