Answered step by step
Verified Expert Solution
Question
1 Approved Answer
please do and show your work in excel The following data for a capital budgeting project for Michigan E-Bike Company. Michigan E-Bike Company is considering
please do and show your work in excel
The following data for a capital budgeting project for Michigan E-Bike Company. Michigan E-Bike Company is considering a new three-year project. The project requires an initial investment of $15 million and an additional working capital investment of $3 million (at time 'o'). The project is estimated to produce 50,000 E-Bikes each year that can be sold for $500/E-Bike. It has variable costs of 30% per year and fixed cost of $4 million per year. The tax rate is 20% and the discount rate (WACC) is 24%. Use straight line depreciation. The project has no salvage value. Working capital is recovered at the end of the project. Develop cash flow estimates for the project for the base case. Calculate the NPV of the project. Generate three possible scenarios and a summary sheet using the "Scenario Manager" in Excel using the following data: Base Case Optimistic Case Pessimistic case Initial Investment $15 million $15 million $15 million Working capital $3 million $3 million $3 million # E-Bikes sold /Year 50,000 60,000 40,000 Price per E-Bike $500 $600 $400 Variable cost/E-Bike 30% 25% 35% [% of Revenues] Fixed costlyear $4 million $4 million $4 million Tax rate 20% 20% 20% Discount rate (WACC) 24% 24% 24% Probabilities 60% 20% 20% Given the probabilities calculate the expected NPV [E(NPV)] for the project in the summary sheet. Indicate your accept reject decision Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started