Goodweek Tires (2)

SUNK COSTS R&D Test Marketing Costs

10,000,000 5,000,000

Time Line

4 yrs INITIAL INVESMENTS

Production Equipment Residual Val on Equipment Working Capital

140,000,000 54,000,000 9,000,000 RATES

INFLATION SALES PRICE INCREASE % VARIABLE COST INCREASE % M & GA COST INCREASE % TAX RATE DISCOUNT RATE OEM PRODUCTION GROWTH RT REPLACEMENT PRODUCTION GROWTH RT WORKING CAPITAL REQUIREMENTS OEM MARKET STATS SuperTread Unit Sales Price SuperTread Unit Variable Cost Market Production for YR 1 GOODWEEK Market Share REPLACEMENT MARKET STATS SuperTread Unit Sales Price Market Production for YR 1 GOODWEEK Market Share

3.25% 1.00% 1.00% 3.25% 40.00% 15.90% 2.50% 2.00% 15.00%

38 22 5,600,000 11.00%

59 14,000,000 8.00%

YEAR ONE EXPENSES MARKETING & GENERAL ADMIN

DEPRECIATION TABL 26,000,000 Recovery YR 0 1 2 3 4 5 6 7 8

Beginning Bal 140,000,000 119,994,000 85,708,000 61,222,000 43,736,000 31,234,000 18,746,000 6,244,000

DEPRECIATION TABLE Depreciation Rate

Depreciation Amt

14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46%

20,006,000 34,286,000 24,486,000 17,486,000 12,502,000 12,488,000 12,502,000 6,244,000

Ending Bal 140,000,000 119,994,000 85,708,000 61,222,000 43,736,000 31,234,000 18,746,000 6,244,000 0

Time CASH FLOW NEEDS EQUIPMENT NET WORKING CAPITAL

0

(140,000,000) (9,000,000) (149,000,000)

1

N/A 23,956,800 14,956,800

REVENUES OEM Market Replacement Market Total EXPENSES VC - OEM Market VC - Replacement Market Total GROSS PROFIT MARKETING & GENERAL ADMIN DEPRECIATION Total EBIT CAPITAL GAINS PRE-TAX INCOME TAXES

93,632,000 66,080,000 159,712,000

54,208,000 24,640,000 78,848,000 80,864,000 26,000,000 20,006,000 46,006,000 34,858,000 0 34,858,000 13,943,200

NET INCOME

20,914,800

CASH FLOW NET INCOME plus: DEPRECIATION

20,914,800 20,006,000

less: CAPITAL GAINS less: CHNG in NET WORKING CAPITAL less: CHNG in CAPITAL EXPENDITURES TOTAL CASH FLOWS

(149,000,000)

0 (14,956,800) 0 25,964,000

PV OF CASH FLOWS

(149,000,000)

22,402,071

2

3

4

N/A 25,547,672

N/A 27,244,345

N/A 29,053,865

1,590,872

1,696,673

1,809,521

100,051,644 70,266,168 170,317,812

106,911,435 74,717,530 181,628,965

114,241,550 79,450,885 193,692,435

57,924,636 26,200,944 84,125,580

61,896,094 27,860,774 89,756,868

66,139,845 29,625,754 95,765,599

86,192,232

91,872,097

97,926,837

26,845,000 34,286,000 61,131,000

28,618,280 24,486,000 53,104,280

31,500,229 17,486,000 48,986,229

25,061,232

38,767,817

48,940,608

0

0

10,264,000

25,061,232

38,767,817

59,204,608

10,024,493

15,507,127

23,681,843

15,036,739

23,260,690

25,258,765

15,036,739 34,286,000

23,260,690 24,486,000

25,258,765 17,486,000

0 (1,590,872) 0 47,731,867

0 (1,696,673) 0 46,050,017

(10,264,000) (1,809,521) 54,000,000 84,671,244

35,533,792

29,578,728

46,924,775

CALCULATION NPV PAYBACK PERIOD DISCOUNTED PAYBACK PERIOD IRR PROFITABILITY INDEX

AMOUNT ($12,563,101.76) 3.35 Greater than 4 yrs 11.68% 0.90

DESCRIPTION As the NPV is Negative, reject the project Based on Payback, the Project would be accepted Since the project takes longer than 4 yrs on a discounted basis, reject project Since IRR is less than the 15.90% discount/hurdle rate, reject the project Since the PI is less than 1, reject the project