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Please show the formulas in the green boxes. Webmasters.com has developed a powerful new server that would be used for corporations' Internet activities. It would
Please show the formulas in the green boxes.
Webmasters.com has developed a powerful new server that would be used for corporations' Internet activities. It would cost $4.250 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 11% of the year's projected sales; for example, NWC0 = 11\%(Sales1). The firm believes it could sell 985 units per year. The servers would sell for $4.47 thousand per unit and Webmasters believes that variable costs would amount to $2.25 thousand per unit. After Year 1, the sales price and variable costs will increase at the inflation rate of 2.0\%. NOTE: The Input Data section already incorporates inflation in cells G70 through J70 and G71 through J71. The company's nonvariable costs would be $0.3 million at Year 1 and would increase with inflation. NOTE: The Input Data section already incorporates inflation in cells G72 through J72. 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 equipment would be depreciated over a 5-year period, using MACRS rates given in the Input Data section below. The estimated market value of the equipment at the end of the project's 4-year life is $500 thousand. Webmasters' federal-plus-state tax rate is 21%. Its cost of capital is 14% for average-risk projects, defined as projects with a coefficient of variation of NPV between 1.9 and 2.3 . Low-risk projects are evaluated with a WACC of 9%, and high-risk projects at 19%. Develop a spreadsheet model using the input data below, and use it to find the project's NPV, IRR, MIRR, and payback, assuming this is an average risk project initially. \begin{tabular}{|c|c|c|c|c|c|c|} \hline \multicolumn{7}{|l|}{ Input Data } \\ \hline WACC & 14% & & & & & \\ \hline \multirow{2}{*}{\multicolumn{2}{|c|}{ Tax rate }} & & & & & \\ \hline & & \multicolumn{5}{|c|}{ Years } \\ \hline \$in thousands & & 0 & 1 & 2 & 3 & 4 \\ \hline Growth rate for units sold & & & & 0.0% & 0.0% & 0.0% \\ \hline Units sold & & & 985 & 985 & 985 & 985 \\ \hline Inflation in prices and costs (starting in year 2 ) & & & & 2.0% & 2.0% & 2.0% \\ \hline Sales price per unit (excl. depr.) & & & $4.47 & $4.56 & $4.65 & $4.74 \\ \hline Variable costs per unit (excl. depr.) & & & $2.25 & $2.30 & $2.34 & $2.39 \\ \hline Nonvariable costs (excl. depr.) & & & $300 & $306 & $312 & $318 \\ \hline Equipment cost - Basis for depreciation & & $4,250 & & & & \\ \hline Annual equipment depr. rate & & & 20.00% & 32.00% & 19.20% & 11.52% \\ \hline Sales price (salvage value) of equipment at Year 4 & & & & & & $500 \\ \hline Net operating working capital/Sales & & 11% & 11% & 11% & 11% & 0% \\ \hline \end{tabular} ***Replace values in yellow cells with formulas. Otherwise your sensitivity and scenario analyses will be incorrect, and YOU WILL LOSE POINTS*** Webmasters.com has developed a powerful new server that would be used for corporations' Internet activities. It would cost $4.250 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 11% of the year's projected sales; for example, NWC0 = 11\%(Sales1). The firm believes it could sell 985 units per year. The servers would sell for $4.47 thousand per unit and Webmasters believes that variable costs would amount to $2.25 thousand per unit. After Year 1, the sales price and variable costs will increase at the inflation rate of 2.0\%. NOTE: The Input Data section already incorporates inflation in cells G70 through J70 and G71 through J71. The company's nonvariable costs would be $0.3 million at Year 1 and would increase with inflation. NOTE: The Input Data section already incorporates inflation in cells G72 through J72. 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 equipment would be depreciated over a 5-year period, using MACRS rates given in the Input Data section below. The estimated market value of the equipment at the end of the project's 4-year life is $500 thousand. Webmasters' federal-plus-state tax rate is 21%. Its cost of capital is 14% for average-risk projects, defined as projects with a coefficient of variation of NPV between 1.9 and 2.3 . Low-risk projects are evaluated with a WACC of 9%, and high-risk projects at 19%. Develop a spreadsheet model using the input data below, and use it to find the project's NPV, IRR, MIRR, and payback, assuming this is an average risk project initially. \begin{tabular}{|c|c|c|c|c|c|c|} \hline \multicolumn{7}{|l|}{ Input Data } \\ \hline WACC & 14% & & & & & \\ \hline \multirow{2}{*}{\multicolumn{2}{|c|}{ Tax rate }} & & & & & \\ \hline & & \multicolumn{5}{|c|}{ Years } \\ \hline \$in thousands & & 0 & 1 & 2 & 3 & 4 \\ \hline Growth rate for units sold & & & & 0.0% & 0.0% & 0.0% \\ \hline Units sold & & & 985 & 985 & 985 & 985 \\ \hline Inflation in prices and costs (starting in year 2 ) & & & & 2.0% & 2.0% & 2.0% \\ \hline Sales price per unit (excl. depr.) & & & $4.47 & $4.56 & $4.65 & $4.74 \\ \hline Variable costs per unit (excl. depr.) & & & $2.25 & $2.30 & $2.34 & $2.39 \\ \hline Nonvariable costs (excl. depr.) & & & $300 & $306 & $312 & $318 \\ \hline Equipment cost - Basis for depreciation & & $4,250 & & & & \\ \hline Annual equipment depr. rate & & & 20.00% & 32.00% & 19.20% & 11.52% \\ \hline Sales price (salvage value) of equipment at Year 4 & & & & & & $500 \\ \hline Net operating working capital/Sales & & 11% & 11% & 11% & 11% & 0% \\ \hline \end{tabular} ***Replace values in yellow cells with formulas. Otherwise your sensitivity and scenario analyses will be incorrect, and YOU WILL LOSE POINTS***Step by Step Solution
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