Instructions of What Is Needed

INSTRUCTIONS OF WHAT IS NEEDED

THIS IS THE INSTRUCTIONAL OUTLINE OF WHAT IS TO BE DONE, AND CHECKED. I am only interested in the INCOME STATEMENT BEING ANALYZED BY YOUR EXPERTISE, AND THEN ONLY CHANGE THE DATA WHERE IT SEEMS INCORRECT, ONLY WITHIN THE INCOME STATEMENT, AND THE CASH FLOW AREAS. I AM ATTACHING TWO EXCEL SHEETS, ONE IS FOR REFERENCE TO COMPARE THE INCOME STATEMENTS, AND THE OTHER IS MARKED FINAL VERSION, OF WHICH WILL HAVE CHANGES DONE IN CALCULATIONS. DO NOT CHANGE FORMULAS PLEASE, FOR THERE ARE ALREADY SCENARIO AND GOAL SEEKS BEEN DONE. I NEED EXTRA ATTENTION TO SEEING IF THE INVESTMENT CUMMALTIVE IS NEEDED, WITHIN THE CALCULATIONS. PLEASE REMEMBER ONLY TO CHANGE DATA WITHIN THE FINAL VERSION, ONLY IN THE INCOME STATEMENT AND CASK FLOW AREAS.

General Battery Company

(Fictitious data)

General Battery Company (GBC) is planning to open Battery Exchange Centers throughout the U.S. where All-Electric car owners can exchange batteries in one minute. This video offers some insights.

They have developed and tested a few prototype centers for the past year at a total cost of $10,000,000. In 2012, they plan to open 50 of these in California. Each year thereafter they plan to open 50 additional units.

Capital Investment will be initially needed for each center as follows:

Batteries: 100 * $5,000 each

Chargers: 25 at $2500 each

Transfer machines: 5 at $75,000 each

Buildings and grounds: $500,000 each

Recharging centers are designed and built in one year and opened for use in the following year. Therefore, the investment for new centers will be incurred in the year prior to the year in which centers are opened. For instance, the investment for the 100 centers planned for 2012 will be incurred in 2011 and similarly through 2016 when the 2016 investment will be incurred in 2015. Assume a total investment amount of $50 million in year 2016

Each center will have the following.

·  Each recharging facility is expected to generate revenue of $7,000 per day. This revenue per center is expected to hold constant over the timeframe of the project.

·  Land for each center will be leased at an annual cost of $50,000 for each center.

·  Administrative expense for each center is estimated at $250,000 annually.

·  Daily operational costs including utilities, labor and material costs, but excluding batteries, will be $4,000 per station.

·  Each year, 50% of the batteries will have to be refurbished at a cost of $2,500 each. This should be considered an annual end of year expense.

·  Depreciation is complicated since additional investment occurs in every year. Therefore, simplify this by simply dividing the cumulative investment in opened centers by 5, which approximates five year straight line depreciation. That is, if the cumulative investment made, in say 2014 is $300,000,000, calculate depreciation as 20% of this or $60,000,000. Assume that there is no depreciation amount in year 2011.

·  Working capital of $2,500,000 is needed for Cash, Inventory, Accounts Payable, and Accounts Receivable starting in 2011 and will increase by 15% per year.

·  Corporate Administrative expense is $5,000,000 annually throughout the planning period and this includes research and development. Marketing is planned at $1,000,000 annually.

·  The value of each center at the end of five years is expected to be $1 million each if sold. Consider this as the salvage value in year 5.

·  The corporate tax rate is 20% and a MARR of 15% is used.