3. NPV analysis

Suppose a company with similar operations to Dropbox will incur the following each year for the next 7 years:

a. Sale of 10,000,000 memberships at $75 each b. Cost of goods sold of $20 each c. Total operating expenses of $220,500,000 d. Assume no net working capital requirements e. An initial investment at the beginning of $5,000,000 which will be depreciated straight-line to zero over the next 7 years

f. f. tax rate 35%

After 7 years, this companys free cash flows will terminate.

Use Excel and the WACC calculated for Dropbox to find NPV of this companys cash flows. In addition, perform a sensitivity analysis for NPV under two parameters: the number of memberships sold and total operating expenses.

Show formulas in excel