• A project requires an initial investment of $200,000 and is expected to produce additional sales revenue of $100,000 per year, which thereafter should grow at the rate of 2%, the expected annual price increases. Costs of goods sold are estimated at 78% of sales. Calculate the cashflows through year 5 and then assume the project life is indefinite.
• The project will require additional working capital of 10% of sales. As working capital ramps up, charge of the year 1 value (5% of sales) in Year 0 and then apply the additional amount required each year. Simply apply the same growth rate as a use of cash in any terminal value calculation
• Grizzly Bears public debt trades at 6% and they estimate their cost of equity at 16%, the debt/equity composition is 30/70
• Grizzly Bear pays corporate taxes at a rate of 21% and - under the new tax law accelerated depreciation allows the depreciation of initial investment for tax purposes in the first year
• Grizzly Bear expects no salvage value
• Calculate cashflows out to year 5, and then make an assumption for the terminal value.
• 1pt for all cash flows related to sales, CofCG, depreciation, and tax being correct.
• 1pt for terminal value, fill cell with yellow paint
• 1pt for correct WC calcs
• 1 pt for CoC, Fill cell with yellow paint
• 1 pt for NPV, fill cell with yellow paint
• 1 pt for IRR, fill cell with yellow paint

• If cost of goods sold can be reduced to 76% of sales, is the project viable? (Do this in a way that doesnt erase your answers above)
• What is the new NPV? (1 pt. fill cell with yellow paint), would you make the investment? (1 pt)