Please answer 2nd picture. Thank you
Webmasters.com has developed a powerful new server that would be used for corporations Internet activities. It would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to 10% of the year's projected sales; for example, NWC0 = 10% ( Sales1). The servers would sell for $24,000 per unit, and Webmasters believes that variable costs would amount to $17,500 per unit. After Year 1, the sales price and variable costs will increase at the inflation rate of 3%. The company's nonvariable costs would be $1 million at Year 1 and would increase with inflation. The server project would have a life of 4 years. If the project is undertaken, it must be continued for the entire 4 years. Also, the project's returns are expected to be highly correlated with returns on the firm's other assets. The firm believes it could sell 1,000 units per year. The equipment would be depreciated using 5-year MACRS rates. The estimated market value of the equipment at the end of the project's 4-year life is $500,000. Webmasters' federal-plus-state tax rate is 40% and its cost of capital is 10%. Develop a spreadsheet model, and use it to find the project's NPV, IRR, MIRR, payback, and discounted PB. Input Data (in thousands of dollars) Equipment cost $10,000 Key Results: Net operating working capital/Sales 10% First year sales (in units) 1,000 Sales price per unit $24.00 Variable cost per unit (excl. depr.) $17.50 Nonvariable costs (excl. depr.) $1,000 Market value of equipment at Year 4 $500 Tax rate 40% WACC 10% Inflation in prices and costs 3.0% Estimated salvage value at year 4 $500 NPV = IRR = MIRR = Payback - Disc. PB. $0 0.0% 0.00 0.0% 0.00 Key Results: Appraisal of the Proposed Project Net Present Value (at 10%) = IRR = MIRR = Payback = Discounted Payback = Data for Payback Years Data for Discounted Payback Years Net cash flow Cumulative CF Part of year required for payback Net cash flow Discounted cash flow Cumulative CF Part of year required for discounted payback 0 1 1 Years 2 Years 2 3 Webmasters.com has developed a powerful new server that would be used for corporations Internet activities. It would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to 10% of the year's projected sales; for example, NWC0 = 10% ( Sales1). The servers would sell for $24,000 per unit, and Webmasters believes that variable costs would amount to $17,500 per unit. After Year 1, the sales price and variable costs will increase at the inflation rate of 3%. The company's nonvariable costs would be $1 million at Year 1 and would increase with inflation. The server project would have a life of 4 years. If the project is undertaken, it must be continued for the entire 4 years. Also, the project's returns are expected to be highly correlated with returns on the firm's other assets. The firm believes it could sell 1,000 units per year. The equipment would be depreciated using 5-year MACRS rates. The estimated market value of the equipment at the end of the project's 4-year life is $500,000. Webmasters' federal-plus-state tax rate is 40% and its cost of capital is 10%. Develop a spreadsheet model, and use it to find the project's NPV, IRR, MIRR, payback, and discounted PB. Input Data (in thousands of dollars) Equipment cost $10,000 Key Results: Net operating working capital/Sales 10% First year sales (in units) 1,000 Sales price per unit $24.00 Variable cost per unit (excl. depr.) $17.50 Nonvariable costs (excl. depr.) $1,000 Market value of equipment at Year 4 $500 Tax rate 40% WACC 10% Inflation in prices and costs 3.0% Estimated salvage value at year 4 $500 NPV = IRR = MIRR = Payback - Disc. PB. $0 0.0% 0.00 0.0% 0.00 Key Results: Appraisal of the Proposed Project Net Present Value (at 10%) = IRR = MIRR = Payback = Discounted Payback = Data for Payback Years Data for Discounted Payback Years Net cash flow Cumulative CF Part of year required for payback Net cash flow Discounted cash flow Cumulative CF Part of year required for discounted payback 0 1 1 Years 2 Years 2 3
