GG Corp is considering the manufacture of a new chemical compound. An investment of $$4$

million in plant and equipment is required. The firm estimates that the investment will have a $5$

year life, and will use straight$-$line depreciation towards a zero salvage value $($depreciating full

amount$).$ However, the investment has an anticipated salvage value equal to $10\%$ of its original

costs. Estimated Sales Volume is estimated to be $1\mathrm{.}8$ million units and grow annually at $10\%.$

Selling price per unit is expected to be $$2$ in year $1,$ and expected to increase by $5\%$ each year.

GG estimates that it will incur additional fixed operating expenses of $$1$ million per year and

variable operating expenses equal to $45\%$ of total revenue. GG estimates that it will need to

invest $400,000$ in net working capital at the start of the project $($year $0).$ All net working capital

will be recouped at the end of the project. Tax rate is $21\%,$ and requires a $15\%$ rate of return.

$1$A$.$ What is the NPV and IRR of this Project?

$1$B$.$ What is the break$-$even sensitivity analysis for the following inputs $($sales growth, initial sales

estimate, price per unit growth rate, variable operating expenses, and tax rate$)?$ From the

analysis performed in $1$B$,$ which variables are the most risky from a capital budgeting

perspective?

$1$C$.$ What is the Accounting$-$Break$-$even and the Cash Break$-$even in year $1$ of the project?

$2.$ Lacoste will have sales of $$678$ million at the end of $2023.$ You anticipate that sales will grow at

$6\%$ for the next $4$ years. After that, sales will grow at a rate of $2\%$ per year indefinitely. EBIT is

$12\%$ of Sales, and increases in net working capital requirements to be $10\%$ of any increase in

sales. Lacoste currently has $$50$ million in cash, $$75$ million in debt, and $32$ million shares

outstanding. Lacoste has a tax rate of $21\%,$ and a cost of capital of $13\%.$

$2$A$.$ What is the estimated Enterprise Value of Lacoste at the start of $2024?$

$2$B$.$ What is the estimated price per share of Lacoste at the start of $2024?$

$2$C$.$ If the industry Enterprise Value$/$Revenue ratio is $12\mathrm{.}82,$ what is the estimated Enterprise

value of Lacoste using a comparable approach?