After many years trying to come up with an experience retail concept, you have finally found one. Its called The Guild. Building the Guild will cost approximately $17,000,000. It will include a number of pieces of machinery which in total cost $3,500,000 and training for the equipment will be an additional $3,000,000.

In order to run the business, inventory will need to be increased by $5,000,000.

The guild is expected to generate $20,000,000 million in revenue in its first year of operation. Each year the companys revenue will grow by 12%.

The companys cost of goods sold are 23% of sales while its total operating costs are $5,000,000.

Most companies like the Guild trade at 5 times after tax cash flow. Use this multiple to calculate the terminal value for the company.

The company will have a tax rate of 25%.

The guild has a three part capital structure with common equity, preferred equity, and debt. The expected return on the stock market is 9.6% and the 10-year government bond is currently yielding 3.2%. Companies like The Guild have a beta of 1.1.

Bonds for The Guild are currently trading at 85% of their par value, with a ten-year maturity, and a 6% coupon, paid semiannually.

Preferred stock trades at $12 per share and pays a dividend of $1.25 per share.

The companys capital structure is 30% common equity, 10% preferred equity, and 60% debt.

Layout all the companys cash flows. Feel free to fail. Put the cash flows where you think they should go. We will perfect this over the next week. Make sure to start with year 0 as the investment year and then the operating years. Label the cash flows. Create a spreadsheet that is organized, clear, and professional.

Calculate the companys NPV, IRR, and payback period.