17. A firm has projected the following financials for a possible project:

YEAR	0	1	2	3	4	5
Sales		122,896.00	122,896.00	122,896.00	122,896.00	122,896.00
Cost of Goods		64,416.00	64,416.00	64,416.00	64,416.00	64,416.00
S&A		30,000.00	30,000.00	30,000.00	30,000.00	30,000.00
Depreciation		23,650.20	23,650.20	23,650.20	23,650.20	23,650.20
Investment in NWC	1,073.00	531.00	531.00	531.00	531.00	531.00
Investment in Gross PPE	118,251.00

The firm has a capital structure of 37.00% debt and 63.00% equity. The cost of debt is 8.00%, while the cost of equity is estimated at 14.00%. The tax rate facing the firm is 35.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year)

What is the NPV of the project? (Hint: Be careful about rounding the WACC here!)

A firm has projected the following financials for a possible project: The firm has a capital structure of 50% debt and 50% equity. The cost of debt is 9%, while the cost of equity is estimated at 12%. The tax rate facing the firm is 35%. What is the NPV for the project? SOLUTION: The NPV is found by discounting the project cash flows at the WACC. The WACC is found with the following: rWACC=wDxrDx(1T)+wExrErWACC=0.50x9%x(10.35)+0.50x12%=0.08925=8.925%NPV=(1+r)1CF1+(1+r)2CF2+(1+r)3CF3+(1+r)4CF4+(1+r)5CF5+CF0 Where r=rWACC NPV=(1.08925)1$26,000+(1.08925)2$26,000+(1.08925)3$26,000+(1.08925)4$26,000+(1.08925)5$26,000$101,000=$328.04