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 Costs (cash) $5/year Selling Costs (cash) $5/year Overall Cost of Capital 12%/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 relevant items of) the balance sheet, the income statement, and the cash-flow statement. Compute the value of this firm, both from finance principles and from the financial statements. (Please note that this is a time-intensive questionalmost a mini-case.)