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Fin 370 Week 4 Team

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Submitted By clarkv44
Words 1014
Pages 5
Caledonia Products
Andrew Sisco, Michael Ponce, Vincent Clark, Donald Burrell
FIN/370
March 25, 2013
Jim Triplett

Caledonia Products
Free Cash Flows or Accounting Profits Earned Caledonia is currently in the position of investigating a new product as well as the evaluation of several mutually exclusive projects. The project free cash flows are more important to focus on than mere accounting profits in this analysis process. The reason for this is that the cash flows show more of what is involved in relation to costs as well as profits. There will be significant costs in operating expenses as well as taxes and initial investments in equipment that should be considered in addition to the accounting profits generated from sales. When comparing this particular investment possibility to other projects the incremental cash flows below should provide a yearly projection of cash flows to compare against the other potential projects.
Incremental Cash Flows – Year 1 to 5

|Project Revenue | |21 million |36 million |42 million |24 million |15.6 million |
|($) | | | | | | |
|Cost of Goods Sold| |12.6 million |21.6 million |25.2 million |14.4 million |10.8 million |
|($) | | | | | | |
|Gross Profit ($) | |8.4 million |14.4 million |16.8 million |9.6 million |4.8 million |
|Cash Operating | |200,000 |200,000 |200,000 |200,000 |200,000 |
|Expenses ($) | | | |

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