I hope to see every buz formula in this question, thank you very much....

FDC has decided to offer Unicorn Cookies. My mother is giving me her old oven worth $50k. FDC thinks that the new cookie will generate $300,000 in incremental sales per year. Fixed costs will be $125,000 per year, and variable costs will be approximately 30% of sales (lots of food coloring). The additional capital investment in the kitchen equipment (that will be capitalized) needed to produce the new cookies will cost $200,000 and will be depreciated in a straight-line manner for the 4 years of the cookies life (if you think unicorn will really last that long, I seriously hope it is already over.

And, now we have working capital to think about- INVENTORY in Year 0 is $20k, in Year 1 is $40k, in Year 2 remains constant at $40k, in Year 3 it declines to $20k, and finally in Year 4 you have no inventory remailing.

The firm has a tax 21%. What are the cash flows?

Lay it out before you start- you get credit for this

FCD funds itself with Debt and with Equity

Equity info

• The market value of the equity is $250,
• and the beta is 1.8
• Risk free rate is 5%
• The market risk premium is 12%

What is the rate investors would expect to earn on the equity given its risk?

Debt Info-

• Book value of the debt is 150k
• Coupon is 12%, YTM is 7.5%
• Term is 5 years with annual coupons

What is the Market Value of the debt?

What percentage of the capital structure is in debt?

What percentage of the capital structure is in equity?

What is the WACC? Please show me the formula with your inputs

Do we accept the project?

t Time ZERO- Year 12 Year 2- Year 3- Year 4 Cash Flow from Capital Investment t t + t + + + t t Inventory Level: Accounts receivable Net Working Capital- + t + + + t t t Cash Flow from Changes in Working Capital t t t t t t t t t t + t + + + + t t t t t t t t t t t t t Cash Flow from Ongoing Operations Annual Components:- Revenue Fixed Expenses Variable Expenses Total Expenses Total Cash Flow from Ongoing Operations Depreciation Taxes After Tax Profit Operating Cash Flow t + t t t t t t t t t + t t t Please evaluate the cash flows for the project - t + t t t t t t NPV? t t t t