Caledonia Products Essay

1348 Words May 21st, 2013 6 Pages
Caledonia Products Integrative Problem

Learning Team “C”

Justin Griffin, Charles Ammah, Constance Allen, Edward Mason, and Mark Dawson

FIN/370
April 25, 2013
Professor Bruce Huang

Caledonia Products Integrative Problem

Learning team C is tasked to prepare a response to the Caledonia Mini-Case located in chapter 12 of his and her readings. The team is to formulate answers to questions one through seven and describe factors Caledonia must consider if it were to lease versus buying. Here is the team’s response to the mini case. 1. Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project? Caledonia
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| | | |
|Units Sold X | |70,000 |120,000 |140,000 |80,000 |60,000 |
|Sale Price = | |$300 |$300 |$300 |$300 |$260 |
| | |$21,000,000 |$36,000,000 |$42,000,000 |$24,000,000 |$15,600,000 |
|Revenue | | | | | | |
| | | | | | | |
|Less Variable Costs | |$12,600,000 |$21,600,000 |$25,200,000 |$14,400,000 |$10,800,000 |
|Less Fixed Costs= | |$200,000 |$200,000 |$200,000 |$200,000 |$200,000 |
| | |$8,200,000 |$14,200,000 |$16,600,000 |$9,400,000 |$4,600,000 |
|Less Depreciation | |$1,600,000 |$1,600,000 |$1,600,000 |$1,600,000 |$1,600,000 |
|Cost: 7,900,000 + | | | | |

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