Corporate Finance: Instructor\'s Manual Applied Corporate Finance

Aswath Damodaran 246

Project Income: Paper Plant

1 2 3 4 5 6 7 8 9 10

Capacity (in

' 000 s) 650 700 750 750 750 750 750 750 750 750

Utilization

Rate 90 % 90 % 90 % 95 % 95 % 95 % 95 % 95 % 95 % 95 %

Production 585 630 675 713 713 713 713 713 713 713

Price per ton 400 400 400 400 400 400 400 400 400 400

Revenues (^234) , 000 252 , 000 270 , 000 285 , 000 285 , 000 285 , 000 285 , 000 285 , 000 285 , 000 285 , 000
Operating
Expenses 178 , 700 188 , 600 1 98 , 500 2 06 , 750 2 06 , 750 206 , 750 206 , 750 2 06 , 750 2 06 , 750 206 , 750
Depreciation 35 , 000 28 , 000 22 , 400 17 , 920 14 , 336 21 , 469 21 , 469 21 , 469 21 , 469 21 , 469
Operating
Income 20 , 300 35 , 400 49 , 100 60 , 330 63 , 914 56 , 781 56 , 781 56 , 781 56 , 781 56 , 781

• Interest 5 , 250 4 , 837 4 , 403 3 , 946 3 , 465 2 , 959 2 , 426 1 , 865 1 , 275 654
  Taxable
  Income 15 , 050 30 , 563 44 , 697 56 , 384 60 , 449 53 , 822 54 , 355 54 , 916 55 , 506 56 , 127


• Taxes 5 , 117 10 , 391 15 , 197 19 , 170 20 , 553 18 , 300 18 , 481 18 , 671 18 , 872 19 , 083
  Net Income 9 , 933 20 , 171 29 , 500 37 , 213 39 , 896 35 , 523 35 , 874 36 , 244 36 , 634 37 , 044

Since the price of paper is held constant (in today’s dollars), these net income

projections are in real terms. The costs are also being held constant in real

dollars.