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Below is how to solve a similar problem, i just cant seem to get the right answer for this one so please help A firm
Below is how to solve a similar problem, i just cant seem to get the right answer for this one so please help
A firm has projected the following financials for a possible project: YEAR Sales 134,936.00 134,936.00 134,936.00 134.936.00 134,936.00 Cost of Goods 67,294.00 67,294.00 67,294.00 67.294.00 67,294.00 S&A 30,000.00 30,000.00 30,000.00 30,000.00 30,000.00 Depreciation 21,796.80 21,796.80 21,796.80 21,796.80 21,796.80 Investment in NWC 1,016.00 571.00 571.00 571.00 571.00 571.00 Investment in Gross PPE 108,984.00 The firm has a capital structure of 41.00% debt and 59.00% equity. The cost of debt is 8.00%, while the cost of equity is estimated at 14.00%. The tax rate facing the firm is 35.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year) What is the NPV of the project? (Hint: Be careful about rounding the WACC here!) Submit 2 YEAR Sales Cost of Goods S&A Depreciation 120000 | 60000 30000 20000 120000 60000 30000 20000 120000 60000 30000 20000 120000 60000 30000 20000 120000 60000 30000 20000 1000 500 500 500 500 500 Investment in NWC Investment in Gross PPE 100000 The firm has a capital structure of 50% debt and 50% equity. The cost of debt is 9%, while the cost of equity is estimated at 12%. The tax rate facing the firm is 35%. What is the NPV for the project? SOLUTION: The NPV is found by discounting the project cash flows at the WACC. The WACC is found with the following: TWACC = wdxrDX(1 -T) + Wexre TWACC = 0.50x9%x(1 -0.35) + 0.50x12% = 0.08925 = 8.925% NPV = f 042+1473)+cafort + 0 7 5,3 + CFO Wherer = TWACC $26,000 $26,000 $26,000 . $26,000 . $26,000 NPV = 5-$101,000 = $328.04 (10892511*(1 0892512+(108925137 (10892574710892575 - $100,000Step by Step Solution
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