Q 13.27. Consider the following project:

Assume customers pay one year after delivery. Con- struct (the relevant items of) the balance sheet, the income statement, and the cash-flow statement. Com- pute the value of this firm, both from finance princi- ples and from the financial statements. (Please note that this is a time-intensive question-almost a mini- case.)

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Project Real Physical Lifespan Cost Gross Output 6 years $150 $50 in year 1 $80 in year 2 $90 in year 3 $50 in year 4 $25 in year 5 - Input Costs (cash) - Selling Costs (cash) Overall Cost of Capital $0 in year 6 $5/year $5/year 12%/year 40%/year $50 10%/year 3 years Linear Corporate Tax Rate (T) Available Financing Debt Capacity Debt Interest Rate Accounting Treatment Accounting Life Depreciation Method