forecast 10 year cash flows with given data and assumptions

Using the income statement from the previous exercise, forecast a ten year cash flow using the following assumptions:

  • Capital Expenditures of $50,000 per year.
  • Leasehold Improvements of $10,000 per year.
  • DSO of 75 Days.
  • Inventory Turnover of 12 times.
  • Accounts Payable of 30 days.
  • Depreciation is constant.
  • The combined Federal and State Tax Rate is 40%.
  • There are no additional financing expenses associated with the transaction.

After you have completed your cash flow forecast, calculate a Net Present Value assuming a discount rate of 15%.

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