pls provide explanation to my workings below for this question,. i have deleted the previous question which was lengthy. just need to view below solution and advise which option debt/equity mix maximises the PV and NPVS....? no cals need but review and explain thanks

Option	NPV ($)
Option 1	633,716.80
Option2	1,181,900.90
Option 3	1,754,958.37

Explanation:

Step 1: Calculate WACC

Calculate WACC using the formula; Wacc= (cost of equity* weight of equity)+ (cost of debt *weight of debt)

WACC
Equity	Debt	Amount of Equity	Amount of Debt	Cost of Equity	Cost of debt	WACC
0.3	0.7	1,500,000	3,500,000	15%	5.50%	8.35%
0.5	0.5	2,500,000	2,500,000	13%	7%	10.00%
0.7	0.3	3,500,000	1,500,000	11.50%	7.50%	10.30%

Calculate the interest and loan balance under each financing option

Option 1
	Principal	Interest	Balance
Year 1	3,500,000.00	192,500.00	3,307,500.00
Year 2	3,307,500.00	181,912.50	3,125,587.50
Year 3	3,125,587.50	171,907.31	2,953,680.19
Year 4	2,953,680.19	162,452.41	2,791,227.78
Year 5	2,791,227.78	153,517.53	2,637,710.25

Option 2
	Principal	Interest	Balance
Year 1	2,500,000.00	175,000.00	2,325,000.00
Year 2	2,325,000.00	162,750.00	2,162,250.00
Year 3	2,162,250.00	151,357.50	2,010,892.50
Year 4	2,010,892.50	140,762.48	1,870,130.03
Year 5	1,870,130.03	130,909.10	1,739,220.92

Option 3
	Principal	Interest	Balance
Year 1	1,500,000.00	112,500.00	1,387,500.00
Year 2	1,387,500.00	104,062.50	1,283,437.50
Year 3	1,283,437.50	96,257.81	1,187,179.69
Year 4	1,187,179.69	89,038.48	1,098,141.21
Year 5	1,098,141.21	82,360.59	1,015,780.62

Calculate Year 5 cashflows:

Cash flow = sale price -loan price

Year cash flow	Option1	Option2	Option 3
Sale price	4,000,000.00	4,000,000.00	4,000,000.00
Loan balance	2,637,710.25	1,739,220.92	1,015,780.62
Cash flow	1,362,289.75	2,260,779.08	2,984,219.38

Calculate the after tax cash flow.

Income after tax= cashflows-interest-tax

Option 1: After-tax cash flow
	Year 1	Year 2	Year 3	Year 4	Year 5
Cash flows	200,000.00	200,000.00	30,000.00	300,000.00	1,362,289.75
Interest	192,500.00	181,912.50	171,907.31	162,452.41	153,517.53
Income before tax	7,500.00	18,087.50	- 141,907.31	137,547.59	1,208,772.22
Tax	1,500.00	3,617.50	-	27,509.52	241,754.44
Income after tax	6,000.00	14,470.00	- 141,907.31	110,038.07	967,017.78
Option 2: After-tax cash flow
	Year 1	Year 2	Year 3	Year 4	Year 5
Cash flows	200,000.00	200,000.00	30,000.00	300,000.00	2,260,779.08
Interest	175,000.00	162,750.00	151,357.50	140,762.48	130,909.10
Income before tax	25,000.00	37,250.00	- 121,357.50	159,237.53	2,129,869.98
Tax	5,000.00	7,450.00	-	31,847.51	425,974.00
Income after tax	20,000.00	29,800.00	- 121,357.50	127,390.02	1,703,895.98
Option 3: After-tax cash flow
	Year 1	Year 2	Year 3	Year 4	Year 5
Cash flows	200,000.00	200,000.00	30,000.00	300,000.00	2,984,219.38
Interest	112,500.00	104,062.50	96,257.81	89,038.48	82,360.59
Income before tax	87,500.00	95,937.50	- 66,257.81	210,961.52	2,901,858.79
Tax	17,500.00	19,187.50	-	42,192.30	580,371.76
Income after tax	70,000.00	76,750.00	- 66,257.81	168,769.22	2,321,487.03

Calculation of NPVs

Option 1	Cash flow	Discounting factor	Present value
Year 1	6,000.00	0.922934933	5,537.61
Year 2	14,470.00	0.851808891	12,325.67
Year 3	- 141,907.31	0.786164182	- 111,562.45
Year 4	110,038.07	0.725578386	79,841.25
Year 5	967,017.78	0.669661639	647,574.71
NPV			633,716.80
Option 2	Cash flow	Discounting factor	Present value
Year 1	20,000.00	0.922934933	18,458.70
Year 2	29,800.00	0.851808891	25,383.90
Year 3	- 121,357.50	0.786164182	- 95,406.92
Year 4	127,390.02	0.725578386	92,431.45
Year 5	1,703,895.98	0.669661639	1,141,033.78
NPV			1,181,900.90
Option 3	Cash flow	Discounting factor	Present value
Year 1	70,000.00	0.922934933	64,605.45
Year 2	76,750.00	0.851808891	65,376.33
Year 3	- 66,257.81	0.786164182	- 52,089.52
Year 4	168,769.22	0.725578386	122,455.30
Year 5	2,321,487.03	0.669661639	1,554,610.81
NPV			1,754,958.37