Please fill out the yellow spaces as shown on the excel sheet 
Webmasters.com has developed a powerful new server that would be used for corporations' Internet activities. It would cost S10 million to buy the equipment necessary to manufacture the server, and it would require net working capital equal to 10% of sales. The servers would sell for $24,000 per unit, and Webmasters believes that variable costs would amount to $17,500 per unit. After the first year, the sales price and variable costs would increase at the inflation rate of 3%. The company's fixed costs be $1 million per year and increase with inflation. It would take one year to buy the required equipment and set up operations, and 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 arc 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 over a 5-year period, using 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%. Its cost of capital is 10% for average risk projects, defined as projects with a coefficient of variation for NPV between 0.8 and 1.2. Low risk projects are evaluated with a WACC of 8%, and high risk projects at 13%. a. Develop a spreadsheet model and use it to find the project's NPV, IRR, and payback. Part 4. Projected Net Cash Flows (Time line of annual cash flows) Investment Ouflays at Time Zero: Equipment Operating Cash Flows over the Project's Life: Units sold Sales price Variable costs Sales revenue Yariable costs Fixed operating costs Depreciation (equipment) Oper. income before taxes (EBIT) Taxes on operating income (40%) Net Operating Profit After Taxes (NOPAT) Add back depreciation Operating cash flow Terminal Yeur Cash Flows: Required level of net operating working capital Required investment in NOWC Terminal Year Cash Finws: Net sulvage value Net Cash Flow (Time line of cash flows) Webmasters.com has developed a powerful new server that would be used for corporations' Internet activities. It would cost S10 million to buy the equipment necessary to manufacture the server, and it would require net working capital equal to 10% of sales. The servers would sell for $24,000 per unit, and Webmasters believes that variable costs would amount to $17,500 per unit. After the first year, the sales price and variable costs would increase at the inflation rate of 3%. The company's fixed costs be $1 million per year and increase with inflation. It would take one year to buy the required equipment and set up operations, and 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 arc 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 over a 5-year period, using 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%. Its cost of capital is 10% for average risk projects, defined as projects with a coefficient of variation for NPV between 0.8 and 1.2. Low risk projects are evaluated with a WACC of 8%, and high risk projects at 13%. a. Develop a spreadsheet model and use it to find the project's NPV, IRR, and payback. Part 4. Projected Net Cash Flows (Time line of annual cash flows) Investment Ouflays at Time Zero: Equipment Operating Cash Flows over the Project's Life: Units sold Sales price Variable costs Sales revenue Yariable costs Fixed operating costs Depreciation (equipment) Oper. income before taxes (EBIT) Taxes on operating income (40%) Net Operating Profit After Taxes (NOPAT) Add back depreciation Operating cash flow Terminal Yeur Cash Flows: Required level of net operating working capital Required investment in NOWC Terminal Year Cash Finws: Net sulvage value Net Cash Flow (Time line of cash flows)
