Firm Ghatotkach has 75,000 shares each valued at $5. The preferred stock is valued at $375,000 and it has 375000 of these shares outstanding. The debt of Ghatotkach has a book value of $250,000 and the YTM equals the coupon rate of 12%. You are also given the following information: the tax rate is 18%; the of the firm is 2; the market risk premium is 5%; the risk free rate of return is 5%; the dividends paid on each preferred stock are 15 cents. It is a 7 year MACRS project (14.29%; 24.49%; 17.49%; 12.49%; 8.93%; 8.93% 8.93%; 4.45%). The firm, however, decides to depreciate the asset starting in Year 2. Unit sales in Year 1 are 1900 units; in Year 2 are 2600 units; Year 3 are 2900 units; in Year 4 are 2300 units; Year 5 are 1100 units and Year 6 are 1800 units. The price per unit is $195 in Year 1 and Year 2 and $ 160 in Years 3-6. Variable costs are 12% of Sales in Years 1, 2 and 3; and 15% of Sales in Years 4 and 5 and 8% of Sales in Year 6; Fixed Costs are $120,000 each Year; the initial NWC is $125,000 and the NWC is 12% of Sales in Years 1 and 2 and 0% of Sales thereafter. The Salvage Value is 2.5% of the cost of the project. Find the NPV and IRR? Also find the NPV if the FLTC of E = 3%; the FLTC of PS is 5%; and the FLTC of D is 4%?

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A D E H K M N P Q R S T U U V W Cost Units Price VC NWC Depreciation 7 Taxes 10 Sales 11 vc Ti 12 FC 13 Dep 14 EBIT 15 Dep 16 Taxes 12 OCF 10 ATSV 19 Change in NWC 20 CFA 21 22 NWC 23 24 E 25 PS 26 D 26 27 v 28 We 2. Wps 30 Wd 31 Re 32 Rps 33 Rd 34 WACC 35 36 FLTCe 37 FLTCps 38 FLTCd 39 WAFLTC 40 Amount Needed 41 FLTC A D E H K M N P Q R S T U U V W Cost Units Price VC NWC Depreciation 7 Taxes 10 Sales 11 vc Ti 12 FC 13 Dep 14 EBIT 15 Dep 16 Taxes 12 OCF 10 ATSV 19 Change in NWC 20 CFA 21 22 NWC 23 24 E 25 PS 26 D 26 27 v 28 We 2. Wps 30 Wd 31 Re 32 Rps 33 Rd 34 WACC 35 36 FLTCe 37 FLTCps 38 FLTCd 39 WAFLTC 40 Amount Needed 41 FLTC