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how did they solve these questions? (please use formulas without excel) Cutting Edge Warehousing is considering a new project which would last for 3 years.

image text in transcribedhow did they solve these questions? (please use formulas without excel)

Cutting Edge Warehousing is considering a new project which would last for 3 years. They have forecasted the following cash flows over the years Apart from the projections in the table above, Cutting Edge Warehousing also has capital expenditures (today) of 120000 , which will be depreciated straight-line over the three years of the project. They will also have to increase their investment in working capital by 8000 in year 1 and year 2 . The entire working capital will be recovered in year 3 . All values are in dollars and the cost of capital is 8% per year. a. What is the NPV of the Free Cash Flows from Cutting Edge's project? The NPV is $ b. Now assume that the Free Cash Flows of Cutting Edge Warehousing is as shown in the table below (ignore your answer in a. and the table above). Further assume that after year 3 the free cash flow will increase with the industry average of 2% per year. Use the cost of capital of 8% and the discounted free cash flow model to estimate Cutting Edge's enterprise value. Cutting Edge's Enterprise Value is $ million (answer in millions with two decimals; 2.79 and not 2790000) c. Assume now that Cutting Edge Warehousing Enterprise Value today is $900000. They have no excess cash, $120000 in debt and 100000 shares outstanding. Estimate their share price. Their share price is $ (answer with two decimals)

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