Question
I'm trying to setup an excel spreadsheet with the following inputs and came seem to hit the mark. Any help with setup? I have to
I'm trying to setup an excel spreadsheet with the following inputs and came seem to hit the mark. Any help with setup?
I have to determine the WACC and the cost of capital for a discounted cash flow with the following inputs:
Debt to Equity is 75%; Interest rate on the debt is 5.50%; Current Risk-Free Rate is .80%; Current Market Premium Rate is 7.25% and the the firms beta is 1.30
Project Considerations -
Project Investment Outlay, Year 0 - $700,000
Project Investment Life 7 years
Project Depreciation - $100,000 / year
Project Salvage Value - $55,000
Working Capital Base of Annual Sales 8%
Expected inflation rate per year, Selling Price Per Unit 2.00%
Expected inflation rate per year, Manufacturing Cost per unit 1.50%
Expected inflation rate per year, Fixed operating costs per year 1.50%
Project Tax Rate 20%
Units sold per year 40,000
Selling Price per Unit, Year 1 - $45.00
Fixed operating costs per year excluding depreciation - $75,000
Manufacturing costs per unit, Year 1 - $35.00
**I also have to do a sensitivity analysis based on the spreadsheet above to account for -
Worst Case Scenario = 20% decrease in sales units sold per year: 25% Probability
Base Case Scenario = 40,000 units sold per year: 55% Probability
Best Case Scenario = 20% increase in sales units sold per year: 20% Probability and show how does this risk analysis effect Net Present Value as supported by the calculations. Thanks!
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