58000 68000 Units 48000 52000 56000 60000 64000 18000 $8000 68000 Unit Costs 0.94 0.95 0.96 0.97 0.98 0.99 1.01 1.02 1.03 1 77 1.81 184 1.82 192 1.95 1.98 2.08 2.07 2.12 Selling Price 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 New Froject Exhibit > Exhibit : Revenue 94,960.00 $ 94.120.00 $ 103,040.00 $ 142 900.00 $ 122,980.00 $ 132,600.00 $ 135,320.00 $ 138,040.00 $ 140,760.00 $ 144,160.00 Cost to Expand 57 917.0 Froduction Expenses 68,680.00 $ 69,360.00 $ 70,040.00 Interest Exp 7.7936 1% Raw Materials 45,120.00 $ 49.400.00 $ 53,760.00 $ 58 200.00 $ 62,720.00 $ 67 320.00 $ 68,000.00 $ 8.00% Manufacturing Overhead 3,600.00 $ 8.708.00 $ 3,819 24 5 3.933.82 $ 4,031 83 5 4.173.39 $ 4,298.59 5 4,427.35 $ 4,360.37 5 4,697.18 Depreciation 336 Maintenance Expense 2,230.00 $ 2 817.30 $ 2,387 03 5 2.458.64 $ 2,132 39 5 2.608.37 $ 2,606.62 5 2.767.22 $ 2,850.23 5 2.935.74 4,DO0 40% Exhibit S Labor Expense 18,640.00 $ 20 233.30 $ 22,842 40 $ 25 254.60 $ 28,174.90 $ 30,898.30 $ 31,969.60 $ 83,088.30 S 34,246.60 $ 35,445.20 Tax Rate 7.80% Selling General and Admin $ 6,626 89 $ 7 341.36 $ 9,037-12 $ 8.798.40 $ 9,58464 $ 10.342.80 $ 10,354.96 $ 10,787.12 5 10,979.28 $ 11,244.49 121,996.49 $ 124,362.60 INPV Discount 7.7536 Total Operating Expense 76,236 09 $ 83.000.16 $ 90,84379 $ 98.643.45 $ 107,063.67 5 115,333.05 $ 117,309.77 $ 119.730.39 5 EBI TDA 9,723 12 $ 11,115.94 $ 12,194 22 $ 14154.39 5 15,816.33 $ 17 266.93 5 17,840.23 $ 18,309.62 5 18,763.52 $ 19,797.40 Flat Depredation 4,000.00 $ 4,000.00 $ 4,000.00 $ 4,000.00 $ 4,000.00 5 4,000.00 $ 4,000.00 $ 4,000.00 $ 4,000.00 $ 4,000.00 14,763.52 $ 15,797.40 EET 4,723 12 $ 7.119.84 9,19421 $ 10,134.35 5 11,816.33 13 266.93 5 13,810.23 $ 14,309.62 5 Interest Expense 4,480 82 5 4,490.82 $ 4,480 82 5 4 480.82 $ 4,480 82 5 4,480.82 $ 4,480.92 5 4,480.82 $ 4,480.92 5 4,480.82 EET 242 30 $ 2.639.02 $ 3,713 39 5 5.673.73 $ 7,383 31 5 8.786.15 $ 9,329.41 5 9.828.80 5 10,282.70 $ 11,316.58 Calc Taxes 96 92 5 1,055.61 $ 1,483 36 $ 2.269.49 $ 2,93421 $ 3.514.43 $ 3,731.77 $ 3.931.52 $ 4,113.09 s 4,526.63 Net Profit 145.39 $ 1 593.41 $ 2,228 04 $ 3.404.24 $ 4,401 31 $ 5.271.60 $ 5,397.65 5 5.897.23 $ 6,169.62 5 6,789.95 Add Depreciation 4,000.00 $ 4,000.00 $ 4,000.00 5 4.000.00 $ 4,000.00 $ 4,000.00 $ 4,000.00 5 4,000.00 $ 4,000.00 5 4,000.00 -17 817.0 $ 4,145 38 $ 3.583.41 $ 6,228 04 5 7.404.24 $ 8,401 31 $ 9.271.68 $ 9.397.65 3 9.897.28 5 10,169.62 $ 10,789.95 Total Cash FI NPV Q2- In talking with advisors about the project, due to uncertainty, a suggestion was made that the discount rate was about 30% too low Calculate whet the new discount rate would be following this suggestion. ( Note: it is not 37-736 That would be over 40036 increase!) What is the new discount rate, and what impact does this hive s bes this have on the project? Given the other implications to the company as presented in the case, and the fact that the cost of capital is 7.7536, what recommendation would you give Mr. Hansson
