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Assume you are working on a new - green field project. You have the following data/information with respect to it: Investments in Year 0 (Rs.
Assume you are working on a new - green field project. You have the following data/information with respect to it: Investments in Year 0 (Rs. In Million) Performance Year 1 (Rs. In Million) Total Current assets 60 Sales 200 Total Fixed Assets 90 CGS 140 (Machinery only) Total Long Term Loans 90 Marketing & Admin Exp (Fixed) 10 Accounts Payable & Accruals 10 Common Equity 60 15% 5% 0.8 Other Information Tax rate 30% Interest Rate on LT Loans Market Risk Premium T-Bills Rate 7% Beta Project's Life (Depreciated 3 years Fully on Straight Line Basis) Salvage value 20 MIN Initial Working Capital 50 MIN Initial Cash outflow in year is $90 mln in machinery and $50 mln in working capital. You are required to: a) Project/forecast the Income Statement for the next 3 years taking growth rate in sales as 5% in year 2 and 10% in year 3. b) Assume all variable expenses will also grow at the same rate. c) Working capital requirement will be 40% of current year sale, while no additions are required in Machinery d) Calculate the Operating Cash Flow e) Find out Project's cash flow adjusting for change in NWC and Fixed Capital expenditure. f) Then compute the following, on standalone basis, assuming WACC as your required rate of return: i. Required Rate of Return on Equity ii. WACC iii. NPV iv. IRR (in case of more than one negative cash flows, compute MIRR)
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