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please show how to solve in excel with the fubctions 2. You are a corporate analyst at a software development company and have been assigned
please show how to solve in excel with the fubctions
2. You are a corporate analyst at a software development company and have been assigned the review of a potential project that the firm is considering. Specifically, the project is a new software package that is sold as an annual subscription. The project is for a five-year time horizon. You have the following relevant cash flows to consider: The annual subscription price is projected to be $50 for the first year, $75 for the second year, and then $90 for years three through five. You estimate you can sell 5,000 subscriptions the first year, 10,000 the second year, 15,000 the third year, and then 20,000 in years four and five each. COGS are expected to be 32% of revenues each year. The project will require net capital spending of $500,000 at time zero, but only $300,000 can be depreciated and will be as a MACRS three-year class. You also will have net capital spending of $100,000 at year 3, but this cannot be depreciated. The project will require an increase in NWC of $100,000 at the beginning, and then another increase of $50,000 at year 3. Only 10% of the total increase can be recovered at the end. The tax rate is 21%. A. What are the NCFs for each of the five years of the Project, along with the NINV? (20 pts) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 B. What is the Net Present Value of the Project if the required return is 10% (5 pts) C. What is the Internal Rate of Return for the Project? (5 pts) Step by Step Solution
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