Problem:
a.) Under the assumption that Ideko market share will increase by 0.5% per year, you determine that the plant will require an expansion in 2010. The cost of this expansion will be $15 million. Assuming the financing of the expansion will be delayed accordingly, calculate the projected interest payments and the amount of projected interest tax shields through 2010.
b.) Under the assumptionthat Ideko's market share will increase by 0.5% per year (andthe investment and financing will be adjusted as described inproblem 3), you project the following depreciation:
Year 2005 2006 2007 2008 2009 2010
Fixed assets and capital investment ($0.00)
2 New Investment $5000 $5000 $5000 $5000 $5000 $5000 $20000
3 Depreciation (5500) (5450) (5405) (5365) (5328) (5328) (6795)
Using this information, project net income through 2010.