4. Would you consider the investment made in Project 4 optimally financed considering the proportion of debt that is bearable by LGI? How did the current WACC in Project 5 depart from the state of the firm in Project 1?

The first two pictures are from project 4, the third project 5, the fourth project 1

Table 1 - Data Cost of the new manfactoring equipment [at ye 5 191.1 million Corporate income tax rate Federal 21.0% Corporate income tax rate State of Maryland 8.0% Discount rate for the project 6.0% 1.06 1.0495 Table 2 - Afterhtax Cash Flow Timeline [all figures in S millions] Projected Cash Projected Cash Depreciation Projected Projected Projected State Projected After- NPV NPV Year Inflows from Outflows- from Expense [stralght Taxable Income Federal Income Income Taxes tax Cash Flows [6%] [4.95] Dperatlons Operatlons lIne] Taxes 0 [191.1] 191.10 191.1 1 350.0 340.0 23.9 (13.9] (2.9] (1.1] 14.0 13.23 13.37 2 900.0 810.0 23.9 66.1 13.9 5.3 70.8 63.04 64.30 3 990.0 870.0 23.9 96.1 20.2 7.7 92.1 77.35 79.70 4 1,005.0 900.0 23.9 81.1 17.0 6.5 81.5 64.54 67.16 5 1,200.0 1,100.0 23.9 76.1 16.0 6.1 77.9 58.23 61.20 6 1,300.0 1,150.0 23.9 126.1 26.5 10.1 113.4 79.96 84.88 7 1,350.0 1,300.0 23.9 26.1 5.5 2.1 42.4 28.22 30.25 8 1,320.0 1,300.0 23.9 [3.9] [0.8] [0.3] 21.1 13.26 14.35 Table 3 - Example - Computing Projected Afterhtax Cash Flows For Year 4 [all figures in S millions] Projected Cash Inflows from Operatio 1005.0 Projected Cash Inflows from Operations 1005.0 minus Projected Cash Outflows from Operat [900.0] minus Projected Cash Outflows from Operations [900.0] minus Depreciation Expense [Ml minus Depreciation Exp [Depreciation is not a cash 0.0 equals Projected Taxable Income 81.1 minus Projected Federal Income Taxes [17.0] equals Projected State Income Taxes @ Projected Taxable Income 81.1 Projected Aftertax Cash Flows 81.5 Table 3 - Example - Computing Projected Alter-tax Cash Flows For Year 4 [all figures in S millions] Projected Cash Inflows from Operatio 1005.0 Projected Cash Inflows from Operations 1005.0 minus Projected Cash Outflows from Operat [900.0] minus Projected Cash Outflows from Operations (900.0) minus Depreciation Expense 1&1 minus Depreciation Exp [Depreciation is not a cash ' 0.0 equals Projected Taxable Income 81.1 minus Projected Federal Income Taxes [17.0] equals Projected State Income Taxes @ Projected Taxable Income 81.1 Projected After-tax Cash Flows 81.5 times Corporate income tax rate Federal 21.0% equals Projected Federal Income Taxes 17.0 Projected Taxable Income times Corporate income tax rate - State 8.0% equals Projected State Income Taxes 6.5 1. Complete Table 2. Compute the projected after tax cash flows for each of years 18. See Column I29 through I36 2. Compute the total present value [PV] of the projected after tax cash flows for years 18. PV = 39?.8 million dollars 3. Compute the net present value [NPV] of the projected after tax cash flows for years 08. NP'IIr = 206.?r million dollars 4. Compute the internal rate of return [IRR] of the project.