Question : Which is the better project and why? (FCFF w/ Project or FCFF without

Question

Question : Which is the better project and why? (FCFF w/ Project or FCFF without Project)

1 2 3 Sales 141,600 172,000 172,000 COGS 111,864 135,880 135,880 SG&A 11,838 14,379 14,379 R&D 7,080 8,600 8,600 EBIT 10,818 13,141 13,141 Depreciation 1,668 1,735 1,870 EBITDA 12,486 14,876 15,010 Depreciation 1,668 1,735 1,870 NEW EBIT 10,818 13,141 13,141 Interest Exp 806 1,002 577 EBT 10,012 12,139 12,564 Taxes (EBIT x tax%) 4,005 4,856 5,025 NI 6,007 7,283 7,538 NWC 37,028 44,978 44,978 Change NWC 1,908 7,950 -   FCFF w/Project EBITDA 12,486 14,876 15,010 Change NWC 1,908 7,950 -   Taxes 4,005 4,856 5,025 CAPEX 3100 900 900 FCFF 3,473 1,171 9,085 FCFF wout Project EBITDA 7262 8591 8659 Change NWC 8,041 6276 0 Taxes 2223 2681 2797 CAPEX 900 900 900 FCFF (3,902) (1,266) 4,962

Explanation / Answer

Under both free cash flow with or without project ,Project 3 is better as it result in highest cash flow among all alternatives .

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