Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A firm has projected the following financials for a possible project: YEAR 0 1 2 3 4 5 Sales 123,422.00 123,422.00 123,422.00 123,422.00 123,422.00 Cost
A firm has projected the following financials for a possible project:
YEAR | 0 | 1 | 2 | 3 | 4 | 5 |
---|---|---|---|---|---|---|
Sales | 123,422.00 | 123,422.00 | 123,422.00 | 123,422.00 | 123,422.00 | |
Cost of Goods | 69,079.00 | 69,079.00 | 69,079.00 | 69,079.00 | 69,079.00 | |
S&A | 30,000.00 | 30,000.00 | 30,000.00 | 30,000.00 | 30,000.00 | |
Depreciation | 22,072.20 | 22,072.20 | 22,072.20 | 22,072.20 | 22,072.20 | |
Investment in NWC | 1,152.00 | 540.00 | 540.00 | 540.00 | 540.00 | 540.00 |
Investment in Gross PPE | 110,361.00 |
The firm has a capital structure of 48.00% debt and 52.00% equity. The cost of debt is 9.00%, while the cost of equity is estimated at 13.00%. The tax rate facing the firm is 37.00%. (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 cash flow for year 1?
What is the NPV of the project? (Hint: Be careful about rounding the WACC here!)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started