Hansen Company Case

Essay by eternidad4@hotmail.c, University, Bachelor's, A, March 2008

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Sheet1

Exibit 1
Overhaul
YEAR012345678910
Overhaul Costs$(14,300)
Increase in Working Capital0.0
Change in Depreciation$(955)$(955)$(955)$(955)$(955)$(955)0.00.00.00.0
Total change in Taxable Income$(955)$(955)$(955)$(955)$(955)$(955)0.00.00.00.0
Change in Tax Expense$334$334$334$334$334$3340.00.00.00.0
Change in Net Income$(621)$(621)$(621)$(621)$(621)$(621)0.00.00.00.0
Depreciation$4,050$4,050$4,050$4,050$4,050$4,0500.00.00.00.0
Opportunity Cost of Floor Space$(750)$(750)$(750)$(750)$(750)$(750)$(750)$(750)$(750)$(750)
Recapture of Capital0.00.00.00.00.00.00.00.00.00.0
Free Cash Flow$(14,300)$2,679$2,679$2,679$2,679$2,679$2,679$(750)$(750)$(750)$(750)
Cost of Capital12%
NPV$(4,439)
IRR-3.87%
Replacement
YEAR012345678910
New Machines & Installation$(50,000)
Tax Shield$3,500
Increase in Working Capital$(1,800)
Change in Depreciation$(1,905)$(1,905)$(1,905)$(1,905)$(1,905)$(1,905)$(1,905)$(1,905)$(1,905)$(1,905)
Direct Labor Savings$6,000$6,000$6,000$6,000$6,000$6,000$6,000$6,000$6,000$6,000
Maintenance Savings$1,400$1,400$1,400$1,400$1,400$1,400$1,400$1,400$1,400$1,400
Total change in Taxable Income$5,495$5,495$5,495$5,495$5,495$5,495$5,495$5,495$5,495$5,495
Increase in Tax Expense$(1,923)$(1,923)$(1,923)$(1,923)$(1,923)$(1,923)$(1,923)$(1,923)$(1,923)$(1,923)
Change in Net Income$3,572$3,572$3,572$3,572$3,572$3,572$3,572$3,572$3,572$3,572
Depreciation$5,000.00$5,000.00$5,000.00$5,000.00$5,000.00$5,000.00$5,000.00$5,000.00$5,000.00$5,000.00
Recapture of Capital$1,800.00
Free Cash Flow$(48,300)$8,572$8,572$8,572$8,572$8,572$8,572$8,572$8,572$8,572$10,372
Tax Rate35%
Cost of Capital12%
NPV$712
IRR12.35%

Sheet2

Sheet3

English: Metropolitan Life Bldg., Manhattan, New York City, in 1911. English: Metropolitan Life Bldg., Manhattan, New Y...
NPV vs discount rate comparison for two mutually exclusive projects. Project 'A' has a higher NPV (for certain discount rates), even though its IRR (=x-axis intercept) is lower than for project 'B' (click to enlarge) NPV vs discount rate comparison for two mutually e...
Net income Net income

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Hansen Company Case. (2008, March 09). In WriteWork.com. Retrieved 10:16, April 19, 2024, from https://www.writework.com/essay/hansen-company-case