Consider the following project

Project

Real Physical Lifespan 6 years

Cost $150

Gross Output $50 in year 1

$80 in year 2

$90 in year 3

$50 in year 4

$25 in year 5

$ 0 in year 6

-Input Cost (cash) $ 5/year

-Selling Cost (cash) $ 5/year

Overall Costs of Capital 2%/year

Corporate Tax Rate (?) 40%/year

Available Financing

Debt Capacity $50

Debt Interest Rate 10%/year

Accounting Treatment

Accounting Life 3 years

Depreciation Method Linear

Assume customers pay one year after delivery. Construct (the relative items of) the balance sheet, income statement, and cash flow statement. Compute the value of this firm, both from finance principles and financial statements.

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