|
3-21
Solution: Before-Tax
Cash Flows in 000's
| Year |
0 |
1 |
2 |
3 |
4 |
5 |
| - Revenues |
|
1,612.0 |
1,378.0 |
910.0 |
655.2 |
487.9 |
| - Royalties |
|
-225.7 |
-192.9 |
-127.4 |
-91.7 |
-68.3 |
| - Operating
Cost |
|
-175.0 |
-193.0 |
-212.0 |
-233.0 |
-256.0 |
| - Intangible |
-750.0 |
-250.0 |
|
|
|
|
| - Tangible |
|
-670.0 |
|
|
|
|
| - Min Rights
Acq. |
-100.0 |
|
|
|
|
|
|
| - Before-Tax
CF |
-850.0 |
291.3 |
992.1 |
570.6 |
330.5 |
163.6 |
NPV Analysis:
| NPV
@ 15% = |
| 0.8696 |
0.7561 |
0.6575 |
| -850 + 291.3(P/F15,1) |
+ 992.1(P/F15,2) |
+ 570.6(P/F15,3) |
|
| |
| |
| 0.5718 |
0.4972 |
|
| + 330.5(P/F15,4) |
+ 163.6(P/F15,5) |
= +$798.9 > 0,
accept |
|
ROR Analysis (i value that makes NPV =
0):
NPV @ 50% = +$41
NPV @ 70% = -$168
ROR = i = 50% + 20%(41/209) = 53.9% > i* = 15%
By financial calculator, i = ROR =
53.276% > i* = 15%, accept
Ratio Analysis:
PVR = 798.9/850 = 0.94 > 0,
B/C Ratio = PVR + 1 = 1.94 > 1.0
Break-even Uniform Selling Price
Per Unit:
| Year |
0 |
1 |
2 |
3 |
4 |
5 |
| - Revenues |
|
62X |
53X |
35X |
24X |
17X |
| - Royalties |
|
-8.68X |
-7.42X |
-4.90X |
-3.36X |
-2.38X |
| - Operating Cost |
|
-175.0 |
-193.0 |
-212.0 |
-233.0 |
-256.0 |
| - Intangible |
-750.0 |
-250.0 |
|
|
|
|
| - Tangible Equip. |
|
-670.0 |
|
|
|
|
| - Min Rights
Acq |
-100.0 |
|
|
|
|
|
|
| - Before-Tax CF |
-850.0 |
53.32X |
45.58X |
30.10X |
20.64X |
14.62X |
| |
|
-1,095 |
-193 |
-212 |
-233 |
-256 |
| PW
Eq: 0 = |
| 0.8696 |
0.7561 |
| -850 + (53.32X-1,095)(P/F15,1) |
+ (45.58X-193)(P/F15,2) |
|
| |
| |
| 0.6575 |
0.5718 |
0.4972 |
| + (30.10X-212)(P/F15,3) |
+ (20.64X-233)(P/F15,4) |
+ (14.62X-256)(P/F15,5) |
|
0 = -2,348.0 + 119.69X
Break-even Price, X = $19.62 per bbl
|
