\f\f\f\fF B D F G H J A 34 55 Market value of debt 56 Market value of equity 57 Market value of preferred 58 Market value of firm 59 60 D/V Mark: 61 E/V weighted average flotation 62 P/V costs. See section 12. 11 in 63 text book 64 a. flotation costs 65 The cost of the land 3 years ago is a sunk 66 cost and is irrelevant. Mark: 67 Land See section 12. 11. Gross 68 Plant & Equipment Cost up items, as appropriate, 69 Net working capital for flotation costs. 70 Total Time o 71 72 b. Pretax cost of debt 73 Aftertax cost of debt 74 Cost of equity 75 Cost of preferred Mark: 76 WACC = WACC + Adjustment for 77 78 Discount rate for project 79 80 c. Book value in year 5 Mark: 81 Aftertax salvage value Gross salvage value - 82 ( (capital gain or loss) times (1 83 d. Sales 84 Variable costs 85 Fixed costs 86 Depreciation 87 EBIT 88 Taxes 89 Net income 90 Depreciation Mark: ( fixed costs + depr) / 91 Operating cash flow (Sales price - variable 92 cost) 93 E. Accounting breakeven 94 95 Year 96 0 97 98 AWN- 99 Mark: 100 = OCF + NWC + NSV + after-tax value of 101 land 102 103 IRR 104 NPV