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Can I get a detailed step by step solution on doing it by hand and also a detailed step by step solution on doing it with excel. Thank you.
require an investment of $575,000. Salvage is expected to be 0 , and the investment is expected to last 10 years. The investment qualifies for a 7 year life under the MACRS system of depreciation. Annual operating and maintenance costs are expected to be $25,000 before any increases. The investment also qualifies for a tax credit of 10%. This tax credit will not decrease the depreciable base. The engineer believes the product will sell for $35.00. The expected annual demand is believed to be 7000 . It is thought that the annual price increase for the product will be 2.3%. Labor and material expenses are expected to be $10.00 per unit. It is expected that these costs will increase 3% each year. Maintenance expenses are also expected to increase by 3% each year. Financing will be 78% through shareholders and 22% debt through a bank loan at 8.75% per year. The debt will be repaid through equal annual payments. The tax rate is 40%.. Prepare a report analyzing this investment. Your report should be considered a report to potential investors. It must be well written with all graphs, charts, and tables clearly labeled. The report should be concise and to the point, and clearly show the basis for your analysis. a. Assume the investors want to earn a 10% after tax return. Use the AEC equation to determine how many units need to be sold per year to earn this return. Construct a spreadsheet showing the ATCF, the EPS, and the income each year. Use solver to verify the units per year. b. Assume the first cost of the investment will be expensed at the end of the first year. Determine how many units need to be sold per year. c. Assume the 10% investment tax credit is not available. Determine how many units need to be sold each year. d. For each of the variables below construct a separate graph showing how the IRR on the equity investment varies as the variable changes. Include these graphs (6, one for each of the variables) e. Use Crystal Ball to allow all of the above variables to change at the same time by assigning appropriate random variables to each parameter given above. Determine which variables have the greatest impact on the IRR. Determine the probability of earning at least a 15% IRR on the after tax equity investment. Calculate a 95% confidence interval on the expected IRR. f. The investors want to know the best debt ratio, and the best way to repay the debt capital. Assume the cost of debt increases as rd increases. Include this analysis in your report
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