Balky Modi, the CFO for the firm PSUWC Designer Shoes Company, LLC, woke up with a start at 4:00 am on 12/13/2021, due to the phone ringing. It was the firms senior financial analyst, vacationing in Europe, calling with bad news. Balky was supposed to present the project evaluation, at the end of the week, for the Board's proposal that they invest in new equipment which would enable them to add a new product line. Currently PSUWC has four successful products and they are considering selling a new Designer Shoes line. The staff of financial analysts had been working hard over the last few weeks collecting data and had prepared a model creating a financial forecast about the proposed project's viability. Disaster had struck on the night of 12/12/2021 wherein malware all but wiped out the work of the analysts. Balky needed to prepare a financial analysis of the project to present the Board with recommendations. All the staff had already left for their annual vacation and Balky was working alone. Balky quickly reached the office and managed to salvage what was left of the excel spreadsheet prepared for the presentation. What follows is some basic information that Balky knew and was able to retrieve about the project. PSUWC's existing plant has excess capacity, in a fully depreciated building, to install and run the new equipment to produce the new Designer Shoes line. Due to relatively rapid advances in technology, the project was expected to be discontinued in four years. The new Designer Shoes was expected to sell for $ 79 per unit and had projected sales of 4800 units in the first year, with a projected (Most-Likely scenario) 18.0 % growth rate per year for subsequent years. A total investment of $ 1,072,000 for new equipment was required. The equipment had fixed maintenance contracts of $ 324,815 per year with a salvage value of $ 134,105 and variable costs were 5 % of revenues. Balky also needed to consider both the Best-Case and Worst-Case scenarios in the analysis with growth rates of 28.00 % and 1.80 % respectively.

(Numerical Inputs Expected from you are highlighted in yellow and Formula/Function Inputs are highlighted in blue) Parameters Economic life of project it Market Value of Equity # of Shares Outstanding Price of New Equipment 186,600.00 Market Value of Debt I of Bonds Outstanding Change in NYC Total Market Value $ Market Price of Bor $ 903.00 Fixed Costs Veight of Equity Market Price of Sto $ 74.00 Variable Costs Z of Revenue) Veight of Debt Salvage value of Ney Equipment E(R) Marginal Tax Rate R. Bond Info Provided for you cons First Year Unit Sales 4800 Years to Marurit Sales Growth Rate 18.00% Cost of Equity.) PNT Unit Sale Price 79.00 Cost of Debt (ra) F! First Year Revenue After-Tax Cost of Debt Before las YIN VACC Before las YTN Note Cells C21 and C22 include the initial (today's) cash flows. Column D through G are the operating cash flows. Spreadsheet for determining Cash Flows Cells G38-G40 contain the terminal cash flows. Timeline: Year 0 2 3 4 II. Net Investment Outlay - Initial CFs Price of Equipment $ (186,600.00) Change in NYC III. Cash Flows from Operations Revenue Generation Unit Sales 4800 Unit Sale Price 79.00 Revenues 379.200.00 Costs Variable Costs Fixed Costs Depreciation Earnings Before Taxes Taxes Net Income Depreciation Net operating CFs IY. Terminal Cash Flors Salvage Value Taxon Salvage Value Return of NWC Y. Final Cash Floy Cash Flows Present Value of CFs NPV of Project Accept? Summarize Answers for NPV under three cases in area beloy Sales Growth Rate NPV Best Case 28.0% Most Likely 18.00% Worst Case 1.8% (Numerical Inputs Expected from you are highlighted in yellow and Formula/Function Inputs are highlighted in blue) Parameters Economic life of project it Market Value of Equity # of Shares Outstanding Price of New Equipment 186,600.00 Market Value of Debt I of Bonds Outstanding Change in NYC Total Market Value $ Market Price of Bor $ 903.00 Fixed Costs Veight of Equity Market Price of Sto $ 74.00 Variable Costs Z of Revenue) Veight of Debt Salvage value of Ney Equipment E(R) Marginal Tax Rate R. Bond Info Provided for you cons First Year Unit Sales 4800 Years to Marurit Sales Growth Rate 18.00% Cost of Equity.) PNT Unit Sale Price 79.00 Cost of Debt (ra) F! First Year Revenue After-Tax Cost of Debt Before las YIN VACC Before las YTN Note Cells C21 and C22 include the initial (today's) cash flows. Column D through G are the operating cash flows. Spreadsheet for determining Cash Flows Cells G38-G40 contain the terminal cash flows. Timeline: Year 0 2 3 4 II. Net Investment Outlay - Initial CFs Price of Equipment $ (186,600.00) Change in NYC III. Cash Flows from Operations Revenue Generation Unit Sales 4800 Unit Sale Price 79.00 Revenues 379.200.00 Costs Variable Costs Fixed Costs Depreciation Earnings Before Taxes Taxes Net Income Depreciation Net operating CFs IY. Terminal Cash Flors Salvage Value Taxon Salvage Value Return of NWC Y. Final Cash Floy Cash Flows Present Value of CFs NPV of Project Accept? Summarize Answers for NPV under three cases in area beloy Sales Growth Rate NPV Best Case 28.0% Most Likely 18.00% Worst Case 1.8%