ABC Inc. produces widgets. They need to buy a new machine in order to increase revenues. Use the information above to answer the following questions. Be sure to show your work so you can receive partial credit. a Calculate the Payback period for Project Pro V1. Assume the company mandates a payback period of 3.5 years or less. Do you accept the project based on payback - briefly explain your answer? (6 points) b. Calculate the WACC for ABC, Inc. For the cost of equity component, calculate it using the DGM (Dividend Growth Model) we used in class. Check your Power Points or Excel Sheets If you aren't sure. (14 points) c. Calculate the NPV for Project Pro V1 (Hint: before you ask me about the discount rate, I had you calculate WACC in part b for a reason). Do you accept the project based on NPV? - Briefly explain your answer. (10 points) Question Completion Status d. Define AND Explain the purpose of BOTH scenario analysis and sensitivity analysis in making capital budgeting decisions. (10 points) e. We stated in class that NPV always gives you the correct goo go decision for a project. Why then should you examine other ratios? Give an example where one of these other ratios might change your decision on a project (6 points) Cash $190,000 Accounts Payable $250,000 Accounts Receivable $240,000 Notes Payable $75,000 Inventory $700,000 Long-Term Debt $350,000 Current Assets $1,130,000 Total Liabilities $675,000 Fixed Assets $500,000 Equity $955,000 Total Liabilities & Equity $1,630,000 Total Assets $1,630,000 Diviend Payout B0.00% Dividend per Share $0.75 Sales $10,800,000 Price of Stock Today $39.50 Cost of Goods Sold $5,520,000 Retention Ratio 20.00% Gross Profit $5,200,000 ROE 25.13% Selling & Admin Expenses $3,360,000 Growth Rate You need to calculate Depreciation $600,000 D1 You need to calculate EBIT $1,320,000 Coupon Rate 4.50% Interest Expense $1,020,000 Tax Rate 20.00% Taxable income $300,000 Taxes 20% $80,000 Not Income $240.000 Project Provi Time Cash Flows -$275,000 1 $70,000 23 4 $75,000 $80.000 75,000