Part a)

Atlanta Pty Ltd (Atlanta) aims to invest $21 Million into a project (project gamma) which increases the firms total EPS. This investment will be depreciated over three years with zero salvage value.

Additional EBITDA earned from the project gamma is estimated to be $8 Million, $10 Million, and $12 Million for the years 1-3 respectively.

Considering WACC of 15%, Tax rate 30%, advise whether Atlanta still benefits to invest in the project gamma or not.

Valuation Method: Economic Value-Added Method (EVA):

Net working capital investment each year: 12% of the EBITDA of the year.

(3 marks for correct invested capital, 3 marks for correct NOPAT for all year, 2 marks for Discounting all EVAs and commenting on the investment decision)