3a.) Under the assumption that Ideko market sharewill increase by 0.5% per year

Question

3a.) Under the assumption that Ideko market sharewill increase by 0.5% per year you determine that the plant willrequire an expansion in 2010. The cost of this expansion willbe $15 million. Assuming the financing of the expansion willbe delayed accordingly, calculate the projected interest paymentsand the amount of projected interest tax shields through2010.

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 NewInvestment                                  $5000     $5000   $5000   $5000  $5000   $5000 $20000

3Depreciation                                        (5500)     (5450)   (5405)   (5365) (5328) (5328) (6795)

Using this information, project net income through2010

Explanation / Answer

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 NewInvestment                                  $5000     $5000   $5000   $5000  $5000   $5000 $20000

3Depreciation                                        (5500)     (5450)   (5405)   (5365) (5328) (5328) (6795)

Using this information, project net income through2010

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