Answers
Answer 1) | |||||
Year 0 | Year 1 | Year 2 | |||
CAPEX | 3.6B | ||||
EBITDA | 9000*X-1.8B | 8000*0.5X-0.5B | |||
depreciation | 1.2B | 1.2B | |||
EBIT | 9000*X-3B | 8000*0.5X-1.7B | |||
Net income | (9000*X-3B)0.75 | (8000*0.5X-1.7B)*0.75 | |||
FCF | EBIT - Taxes + Depreciation & Amortization - Capex – Change in Working Capital, | ||||
(9000*X-3B)0.75+1.2B-1000*X | (8000*0.5X-1.7B)*0.75+1.2B-500*X | ||||
FCF | |||||
NPV= | (-3.6B)+(9000*X-3B)0.75+1.2B-1000*X/1.25+(8000*0.5X-1.7B)*0.75+1.2B-500*X/(1.25*1.25) | ||||
Answer 2) | |||||
If X=1 mn and launched in year 0 | |||||
FCF | (9000*1-3*1000)0.75+1200-1000*1 | ||||
4700 | |||||
NPV | 160 | ||||
If X=0.2 mn and launched in year 0 | |||||
FCF | (9000*0.2-3*1000)0.75+1200-1000*0.2 | ||||
100 | |||||
NPV | -3520 | ||||
If X=1 mn | If X=0.2 mn | ||||
0.6 | 0.4 | ||||
combined chances | 96 | -1408 | |||
Answer 3) | |||||
If X=0.9 mn and launched in year 1 | |||||
FCF | (8000*0.5*0.9-1700)*0.75+1200-500*0.9 | ||||
2175 | |||||
NPV | -1860 | ||||
If X=0.2 mn and launched in year 1 | |||||
FCF | (8000*0.5*0.2-1700)*0.75+1200-500*0.2 | ||||
425 | |||||
NPV | -3260 | ||||
So if they are thinking to launch than they should launch in year 0, year 1 will bring loss even if customer sentiments are high for the phone. |
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