51. Dorm Beds Example OCF 3 7- We get our $10,000 NWC back and sell the equipment. The after-tax salvage value is $6,600 = $10,000 × (1-.34) Thus, OCF 3 = $716,300 + $10,000 + $6,600 = $732,900 Revenue 10,000 × $200 = $2,000,000 Variable cost 10,000 × $90 = $900,000 Fixed cost $25,000 Depreciation $60,000 ÷ 3 = $20,000 EBIT 10,000 × $200 = $1,055,000 Tax $358,700 NI $696,300 OCF = NI + D $716,300
52.
Notas del editor
When I was an undergrad at the University of Missouri-Rolla, a good friend of mine abandoned college three credit hours shy of graduation. Really. Entreaties from his friends and parents regarding how far he had come and how hard he had worked could not change Louis’ mind. That was all a sunk cost to Louis. He already had a job and didn’t value the degree as much as the incremental work of an easy three-hour required class called ET-10 engineering drafting. Fifteen years later, he still has a good job, a great wife and two charming daughters. Louis taught me a lot about sunk costs.
When I was an undergrad at the University of Missouri-Rolla, a good friend of mine abandoned college three credit hours shy of graduation. Really. Entreaties from his friends and parents regarding how far he had come and how hard he had worked could not change Louis’ mind. That was all a sunk cost to Louis. He already had a job and didn’t value the degree as much as the incremental work of an easy three-hour required class called ET-10 engineering drafting. Fifteen years later, he still has a good job, a great wife and two charming daughters. Louis taught me a lot about sunk costs.
See the text for the details of the case.
The cash flows in years 2,3, and 4 are easily verified.
To find A r T , just make PMT = $1 in your financial calculator, set T and r , and solve for PV
The often-cited investor who wants to keep his affairs private is described as “a Belgian Dentist”.