Please fill in the remainder information in the excel chart. with the information provided below I have already started putting in the information for the original problem.

Market Value of Capital

1. The company has 60,000 with a 30-year life outstanding, with 15 years until maturity. The bonds carry a 10% semi-annual coupon and are currently selling for $874.78.

2. You have 100,000 shares of $100 par 9% dividend perpetual preferred stock outstanding. The current market price is $90.00.

3. The company has 5 million shares of common stock outstanding with a currently price of $17.00 per share. The stock exhibits a constant growth rate of 10 percent. The dividend (D (0)) was $65.

4. The risk-free rate is currently 6 percent, and the rate of return on the stock market as a whole is 13 percent. Your stocks beta is 1.22.

5. Your firm only uses books for long-term financing.

6. The firms Federal + state margin tax rate is 40%. (Ignore any carryforward implications)

Project L: This project requires an initial investment of $2,000,000 in equipment which will cost an additional $75,000 to install. The firm will use the attached MACRS depreciation schedule to expense this equipment. Once the equipment is installed, the company will need to increase net working capital by $100,000. The project will last 6 years at which time the market value for the equipment will be $180,000. The project will project a product with a sales price of $32.00 per unit and the variable cost per unit will be $11.00. The fixed costs would be $110,000 per year. Because this project is very close to current products sold by the business, management wants you to apply the WACC as the discount rate to the project. Years 2014 Forecasted Units Sold 32,000 2015 45,000 2017 2016 48,000 58,000 2018 75,000 2019 90,000 Initial Cost Installation Cost Increase in NWC Salvage Value Units sold Depreciation Rate Years Sales Variable Cost Fixed Cost EBITDA Depreciation EBIT Tax Expense Net Income Operating Cash Flow Capital Spending Cash Flow Net Working Capital Cash Flow Total Cash Flows Total Cumulative Cash Flows Internal Rate of Return Net Present Value Initial Cost Installation Cost Increase in NWC Salvage Value $ 2,000,000 Price $ $ 100,000 Fixed Cost $ 180,000 $ $ ORIGINAL SCENARIO 75,000 Variable Cost Year 0 (2,075,000) (100,000) (2,175,000) $ $ $ (2,175,000) $ Year 1 320,000 20.0% 1 $10,240,000 $3,520,000 $110,000 $6,610,000 $415,000 $6,195,000 $2,478,000 $3,717,000 Year 1 $4,132,000 $ $32.00 Tax Rate $11.00 Required Return 110,000 Year 2 45,000 32.0% 2 $1,440,000 $495,000 $110,000 $835,000 $664,000 $171,000 $68,400 $102,600 Year 2 $766,600 4,132,000 $ 766,600 $ 1,957,000 $ 2,723,600 $ Payback Period Profitability Index PRICE REDUCTION SCENARIO Price Variable Cost Fixed Cost Year 3 48,000 19.0% Year 3 $696,500 40% Year 4 Tax Rate Required Return 58,000 12.0% Year 5 75,000 11.0% 3 5 6 $1,536,000 $1,856,000 $2,400,000 $2,880,000 $528,000 $638,000 $825,000 $990,000 $110,000 $110,000 $110,000 $110,000 $898,000 $1,108,000 $1,465,000 $1,780,000 $394,250 $249,000 $228,250 $124,500 $503,750 $859,000 $1,236,750 $1,655,500 $201,500 $343,600 $494,700 $662,200 $302,250 $515,400 $993,300 $742,050 Year 6 Year 5 Year 4 $764,400 $970,300 90,000 6.0% Year 6 $1,117,800 $108,000 $ 100,000 696,500 $764,400 $ 970,300 $1,325,800 3,420,100 $4,184,500 $5,154,800 $6,480,600 29 30 31 Initial Cost 32 Installation Cost 33 Increase in NWC 34 Salvage Value 35 36 37 Units sold 38 Depreciation Rate 39 40 Years 41 Sales 42 Variable Cost 43 Fixed Cost 44 EBITDA 45 Depreciation 46 EBIT 47 Tax Expense 48 Net Income 49 50 51 Operating Cash Flow 52 Capital Spending Cash Flow 53 Net Working Capital Cash Flow 54 Total Cash Flows 55 Total Cumulative Cash Flows 56 Internal Rate of Return 57 Net Present Value 58 Year 0 PRICE REDUCTION SCENARIO Price Variable Cost Fixed Cost Year 1 1 Year 1 Year 2 2 Year 2 Tax Rate Required Return Payback Period Profitability Index Year 3 3 Year 3 Year 4 4 Year 4 Year 5 5 Year 5 Year 6 6 Year 6 59 60 Initial Cost 61 Installation Cost 62 Increase in NWC 63 Salvage Value 64 65 66 Original Volume Sold 67 Reduced Volume Sold 68 Depreciation Rate 69 70 Years 71 Sales 72 Variable Cost 73 Fixed Cost 74 EBITDA 75 Depreciation 76 EBIT 77 Tax Expense 78 Net Income 79 80 81 Operating Cash Flow 82 Capital Spending Cash Flow 83 Net Working Capital Cash Flow 84 Total Cash Flows 85 Total Cumulative Cash Flows 86 Internal Rate of Return 87 Net Present Value 88 89 90 Year 0 VOLUME REDUCTION SCENARIO Price Variable Cost Fixed Cost Year 1 Year 1 Year 2 2 Year 2 Tax Rate Required Return Payback Period Profitability Index Year 3 3 Year 3 Year 4 4 Year 4 Year 5 5 Year 5 Year 6 6 Year 6 Project L: This project requires an initial investment of $2,000,000 in equipment which will cost an additional $75,000 to install. The firm will use the attached MACRS depreciation schedule to expense this equipment. Once the equipment is installed, the company will need to increase net working capital by $100,000. The project will last 6 years at which time the market value for the equipment will be $180,000. The project will project a product with a sales price of $32.00 per unit and the variable cost per unit will be $11.00. The fixed costs would be $110,000 per year. Because this project is very close to current products sold by the business, management wants you to apply the WACC as the discount rate to the project. Years 2014 Forecasted Units Sold 32,000 2015 45,000 2017 2016 48,000 58,000 2018 75,000 2019 90,000 Initial Cost Installation Cost Increase in NWC Salvage Value Units sold Depreciation Rate Years Sales Variable Cost Fixed Cost EBITDA Depreciation EBIT Tax Expense Net Income Operating Cash Flow Capital Spending Cash Flow Net Working Capital Cash Flow Total Cash Flows Total Cumulative Cash Flows Internal Rate of Return Net Present Value Initial Cost Installation Cost Increase in NWC Salvage Value $ 2,000,000 Price $ $ 100,000 Fixed Cost $ 180,000 $ $ ORIGINAL SCENARIO 75,000 Variable Cost Year 0 (2,075,000) (100,000) (2,175,000) $ $ $ (2,175,000) $ Year 1 320,000 20.0% 1 $10,240,000 $3,520,000 $110,000 $6,610,000 $415,000 $6,195,000 $2,478,000 $3,717,000 Year 1 $4,132,000 $ $32.00 Tax Rate $11.00 Required Return 110,000 Year 2 45,000 32.0% 2 $1,440,000 $495,000 $110,000 $835,000 $664,000 $171,000 $68,400 $102,600 Year 2 $766,600 4,132,000 $ 766,600 $ 1,957,000 $ 2,723,600 $ Payback Period Profitability Index PRICE REDUCTION SCENARIO Price Variable Cost Fixed Cost Year 3 48,000 19.0% Year 3 $696,500 40% Year 4 Tax Rate Required Return 58,000 12.0% Year 5 75,000 11.0% 3 5 6 $1,536,000 $1,856,000 $2,400,000 $2,880,000 $528,000 $638,000 $825,000 $990,000 $110,000 $110,000 $110,000 $110,000 $898,000 $1,108,000 $1,465,000 $1,780,000 $394,250 $249,000 $228,250 $124,500 $503,750 $859,000 $1,236,750 $1,655,500 $201,500 $343,600 $494,700 $662,200 $302,250 $515,400 $993,300 $742,050 Year 6 Year 5 Year 4 $764,400 $970,300 90,000 6.0% Year 6 $1,117,800 $108,000 $ 100,000 696,500 $764,400 $ 970,300 $1,325,800 3,420,100 $4,184,500 $5,154,800 $6,480,600 29 30 31 Initial Cost 32 Installation Cost 33 Increase in NWC 34 Salvage Value 35 36 37 Units sold 38 Depreciation Rate 39 40 Years 41 Sales 42 Variable Cost 43 Fixed Cost 44 EBITDA 45 Depreciation 46 EBIT 47 Tax Expense 48 Net Income 49 50 51 Operating Cash Flow 52 Capital Spending Cash Flow 53 Net Working Capital Cash Flow 54 Total Cash Flows 55 Total Cumulative Cash Flows 56 Internal Rate of Return 57 Net Present Value 58 Year 0 PRICE REDUCTION SCENARIO Price Variable Cost Fixed Cost Year 1 1 Year 1 Year 2 2 Year 2 Tax Rate Required Return Payback Period Profitability Index Year 3 3 Year 3 Year 4 4 Year 4 Year 5 5 Year 5 Year 6 6 Year 6 59 60 Initial Cost 61 Installation Cost 62 Increase in NWC 63 Salvage Value 64 65 66 Original Volume Sold 67 Reduced Volume Sold 68 Depreciation Rate 69 70 Years 71 Sales 72 Variable Cost 73 Fixed Cost 74 EBITDA 75 Depreciation 76 EBIT 77 Tax Expense 78 Net Income 79 80 81 Operating Cash Flow 82 Capital Spending Cash Flow 83 Net Working Capital Cash Flow 84 Total Cash Flows 85 Total Cumulative Cash Flows 86 Internal Rate of Return 87 Net Present Value 88 89 90 Year 0 VOLUME REDUCTION SCENARIO Price Variable Cost Fixed Cost Year 1 Year 1 Year 2 2 Year 2 Tax Rate Required Return Payback Period Profitability Index Year 3 3 Year 3 Year 4 4 Year 4 Year 5 5 Year 5 Year 6 6 Year 6