Apache Airlines, a privately held firm, is looking to buy additional gates at its home airport for $800,000 Apache has $240,000 in the bank but that money may not be spent as it is used to pay salaries, suppliers, and equipment Apache asked its bank for a loan but the bank refused saying that Apache's interest-bearing debt to equity was too high at 3.1 The bank said that Apache needed to lower that ratio below 2.3 in order to get the loan Separately, SkyBlue Airlines has approached Apache to see if Apache will buy it.

Aside from the purchase price, the gates will require a working capital infusion at purchase of $300,000 Apache estimates the gates will generate cash flows of $265,000/year for the next 8 years After that, the gates will revert back to the airport operator You must calculate the NPV and IRR of the gates.

Please show all Excel formulas.

B D E F G H L M N 1 A I J K This case has the following road map: 2 Tab 3 WACC Shows the financials for both airlines and calculated the weighed average cost of capital (WACC) for the combined airline 4 Machine NPV Please calculate the NPV of the new gates 5 SkyBlue financials Calculate SkyBlue's income statement (IS) and balance sheet (BS) in order to run free cash flows in the valuation tab 6 SkyBlue valuation Calculate the present value of SkyBlue using free cash flows 7 Apache BS (balance sheet) Shows Apache's balance sheet for 2018 and forecast 2019-2021 8 Consolidated BS Consolidates Apache's and SkyBlue's balance sheets and recalculates the bank ratios 9 10 Please note: All figures are in thousand $ unless noted otherwise A B D E F. G . I J 1 Start Year 1 Year 1 Year 2 Year 3 Year 4 Year 4 Year 5 Year 6 Year 7 Year 8 2 Investment 3 Working Capital 4 Operating Cash Flow 5 Total Cash Flow 6 7 NPV 8 IRR 9 10 Note: Show all numbers in thousand dollars. B D E F G H L M N 1 A I J K This case has the following road map: 2 Tab 3 WACC Shows the financials for both airlines and calculated the weighed average cost of capital (WACC) for the combined airline 4 Machine NPV Please calculate the NPV of the new gates 5 SkyBlue financials Calculate SkyBlue's income statement (IS) and balance sheet (BS) in order to run free cash flows in the valuation tab 6 SkyBlue valuation Calculate the present value of SkyBlue using free cash flows 7 Apache BS (balance sheet) Shows Apache's balance sheet for 2018 and forecast 2019-2021 8 Consolidated BS Consolidates Apache's and SkyBlue's balance sheets and recalculates the bank ratios 9 10 Please note: All figures are in thousand $ unless noted otherwise A B D E F. G . I J 1 Start Year 1 Year 1 Year 2 Year 3 Year 4 Year 4 Year 5 Year 6 Year 7 Year 8 2 Investment 3 Working Capital 4 Operating Cash Flow 5 Total Cash Flow 6 7 NPV 8 IRR 9 10 Note: Show all numbers in thousand dollars