Determine the values for years 0-4

The Pixar Corporation has an opportunity to sell Buzz Lightyear flying action figures. Woody, the CEO, would like for Rex, the vice president, to evaluate the project. Mr. Potato Head, operations manager, believes the equipment will cost $700,000 with shipping and installation being another $70,000. Mr. Potato Head believes the cost will be $3.50 per unit or 35% of sales plus a fixed cost of $50,000. Mr. Potato Head estimates inventory will be increased by $80,000. Mr. Potato Head believes after the three-year run of action figures, the equipment will be worth $375,000. Bo Peep, marketing manager, believes that the demand for the Buzz Lightyear flying action figures will be 90,000 units in the first year, 75,000 in the second year, and 60,000 units in the third year. Bo Peep tells Rex that she believes the price will be $10 per unit. Slinky Dog, the CFO, says the equipment will fall under the 3-years MACRS schedule. Slinky Dog believes accounts payable will increase by $35,000 and accounts receivable will increase by $40,000. Slinky Dog tells Rex that the corporate tax rate is a flat 40%. Hamm, assistant financial accountant, says the required return on a project of this type should be (Use WACC). Rex needs to report the NPV, IRR, Payback, WACC and the accept/reject decision to Woody. Pixar Corporation stock sells for $40. They plan to pay $3.75 in dividends next year. They are expected to grow at 8.75%. Treasury bonds yield 3.5%. The market is expected to return 11.5%. They have a beta of 1.83. Their bonds sell for $1090. They have 15 years till maturity. They pay semi-annual payments. Par is $1000. The coupon rate is 8%. Liabilities and Assets Owners' Equity Current assets Current liabilities Cash $ 200.00 Accounts payable $ 40.00 Accounts receivable $ 400.00 Notes payable $ 60.00 Inventory $ 200.00 Total $ 100.00 Total $ 800.00 Fixed assets Net plant and equipment $ 3,200.00 Long-term debt $ 500.00 Owners' equity Common stock $ 500.00 Retained earnings $ 2,900.00 Total $ 3,400.00 Total assets $ 4,000.00 Total liabilities and $ 4,000.00 owners' equity MACRS Year 1 33% Year 2 45% Year 3 15% Year 4 7% Capital Budgeting Worksheet Year 0 1 2 3 4 Initial Oulay Cost Installation NWC Total OFC Sales Cost Depreciation OIBY Tax OIAT Depreciation OCF TCF NWC Salvage Tax Total NCF