A project to replace Jordan Belfort's yacht requires an initial investment of $3,500,000 and is expected to produce charter revenue, resulting in operating earnings (before depreciation and tax (EBITDA)) of $800,000 per year for 5 years

Stratton Oakmont pays corporate taxes at a rate of 21% and can depreciate the initial investment for tax purposes at 25% in each of the first four years

Their public debt trades at 5% and they estimate their cost of equity at 15%, the debt/equity composition is 30/70

Context: All projects are on the margin, just one of many things large firms do.In thinking about taxes:Again, this is a large company that pays taxes at the rate stated.The "yacht" is a single project, just one of many in which the firm is engaged.If (or when) this project produces a profit, then taxes for the whole firm are higher.If (or when) this project produces a loss - then that is more expenses for the firm, meaning what?Meaning that the entire firm has more expenses, and thus pays lower taxes, right?

Calculate WACC, the project NPV and IRR, show all work on a submitted xls file.

Then, scenario two, assume that operating earnings grow by 5% each year, from the initial $800,000 and the boat will receive those revenues for 7 years, not 5.

Calculate NPV, IRR

Fill five answer cells with yellow paint, 2 pts each, no partial credit