Q1: Tucker is becoming more confident with the numbers in the proposal, but is uneasy about the short-term nature of the contract. He is wondering if it might be advantageous to try and renegotiate the contract in an exchange for a longer commitment for the client. His discussion with you included a fixed price for 5 years followed by a reasonable growth period. He is hoping that some incentive will be enough to get a 5-year commitment. Complete your calculations under the Q.1 tab. You must calculate the new NPV and IRR given your suggested price. You must also include the impact to the customer by calculating the cost of the contract before and after making price changes. Should Hansson accept this, and would you accept this if you were the customer?

Exhibit 5 57,817.0 7.75% 4,000 7.75% Exhibit 5 40% Exhibit 5 New Project Revenue Production Expenses 1% Raw Materials 3.00% Manufacturing Overhead 3% Maintenance Expense Labor Expense 7.80% Selling General and Admin Total Operating Expense FAITDA Depreciation EBIT Interest Expense EBT Taxes Net Profit Add Depreciation Total Cash Fl NPV IRR Flat Flat Calc Flat Units Unit Costs Selling Price $ $ $ 5 S 5 $ S $ S 5 5 $ 5 S -57,817.0 S 48000 0.94 1.77 2009 84,960.00 $ 45,120.00 $ 3,600.00 $ 2,250.00 $ 18,640.00 $ 6,626.88 $ 76,236.88 $ 8,723.12 $ 4,000.00 5 4,723.12 $ 4,480.82 $ 242.30 $ 96.92 5 145.38 5 4,000.00 $ 4,145.38 5 56000 0.96 1.84 2011 103,040.00 S 53,760.00 $ 3,819.24 $ 2.387.03 $ 22,842.40 S 8,037.12 $ 90,845.79 S 12,194.22 $ 4,000.00 $ 8,194.22 $ 4,480.82 $ 3,713.40 $ 1,485.36 $ 2,228.04 $ 4,000.00 $ 6,228.04 $ 52000 0.95 1.81 2010 94,120.00 S 49,400.00 $ 3,708.00 $ 2,317.50 $ 20,233.30 $ 7,341.36 $ 83,000.16 S 11,119.84 $ 4,000.00 $ 7,119.84 S 4,480.82 $ 2,639.02 $ 1,055.61 $ 1.583.41 5 4,000.00 $ 5,583.41 S Cost of 10 year contract to customer Base Scenario 5 YR fixed Pricing 60000 0.97 1.88 2012 112,800.00 $ 58,200.00 $ 3,933.82 $ 2,458.64 $ 25,254.60 $ 8,798.40 $ 98,645.45 $ 14,154.55 $ 4,000.00 $ 10,154.55 $ 4,480.82 $ 5,673.73 $ 2,269.49 $ 3,404.24 $ 4,000.00 $ 7,404.24 $ 64000 0.98 1.92 2013 122,880.00 $ 62,720.00 $ 4,051.83 $ 2,532.39 $ 28,174,80 S 9,584.64 $ 107,063.67 $ 15,816.33 $ 4,000.00 $ 11,816.33 $ 4,480.82 $ 7.335.51 $ 2,934.21 $ 4,401.31 $ 4,000.00 $ 8,401.31 $ 68000 0.99 1.95 2014 132,600.00 $ 67,320.00 $ 4,173.39 $ 2,608.37 $ 30,888.50 S $ 10.342.80 $ 115,333.05 $ 17,266.95 $ 4,000.00 $ 13,266.95 $ 4,480.82 $ 8.786.13 $ 3,514.45 $ 5,271.68 $ 4,000.00 $ 9,271.68 $ 68000 1 1.99 2015 135,320.00 $ 68,000.00 $ 4,298.59 $ 2,686.62 $ 31,969.60 $ 10,554.95 $ 117,509.77 $ 17,810.23 $ 4,000.00 $ 13,810.23 $ 4,480.82 $ 9,329.11 $ 3,731.77 $ 5,597.65 $ 4,000.00 $ 9,597.65 $ 68000 1.01 2.03 2016 138,040.00 $ 68,680.00 $ 4,427.55 $ 2.767.22 $ 33,088.50 $ 10,767.12 S 119,730.38 $ 18,309.62 S 4,000.00 $ 14,309.62 $ 4,480.82 $ 9,828.80 S 3.931.52 S 5,897.28 $ 4,000.00 $ 9,897.28 $ 68000 1.02 2.07 2017 140,760.00 $ 69,360.00 $ 4,560.37 $ 2,850.23 $ 34,246.60 $ 10,979.28 $ 121,996.48 $ 18,763.52 $ 4,000.00 $ 14,763.52 $ 4,480.82 $ 10,282.70 $ 4,113.08 $ 6,169.62 $ 4,000.00 $ 10,169.62 $ 68000 1.03 2.12 2018 144,160.00 70,040.00 4,697.18 2,935.74 35,445.20 11,244.48 124,362.60 19,797.40 4,000.00 15,797.40 4,480.82 11,316.58 4,526.63 6,789.95 4,000.00 10,789.95 Exhibit 5 57,817.0 7.75% 4,000 7.75% Exhibit 5 40% Exhibit 5 New Project Revenue Production Expenses 1% Raw Materials 3.00% Manufacturing Overhead 3% Maintenance Expense Labor Expense 7.80% Selling General and Admin Total Operating Expense FAITDA Depreciation EBIT Interest Expense EBT Taxes Net Profit Add Depreciation Total Cash Fl NPV IRR Flat Flat Calc Flat Units Unit Costs Selling Price $ $ $ 5 S 5 $ S $ S 5 5 $ 5 S -57,817.0 S 48000 0.94 1.77 2009 84,960.00 $ 45,120.00 $ 3,600.00 $ 2,250.00 $ 18,640.00 $ 6,626.88 $ 76,236.88 $ 8,723.12 $ 4,000.00 5 4,723.12 $ 4,480.82 $ 242.30 $ 96.92 5 145.38 5 4,000.00 $ 4,145.38 5 56000 0.96 1.84 2011 103,040.00 S 53,760.00 $ 3,819.24 $ 2.387.03 $ 22,842.40 S 8,037.12 $ 90,845.79 S 12,194.22 $ 4,000.00 $ 8,194.22 $ 4,480.82 $ 3,713.40 $ 1,485.36 $ 2,228.04 $ 4,000.00 $ 6,228.04 $ 52000 0.95 1.81 2010 94,120.00 S 49,400.00 $ 3,708.00 $ 2,317.50 $ 20,233.30 $ 7,341.36 $ 83,000.16 S 11,119.84 $ 4,000.00 $ 7,119.84 S 4,480.82 $ 2,639.02 $ 1,055.61 $ 1.583.41 5 4,000.00 $ 5,583.41 S Cost of 10 year contract to customer Base Scenario 5 YR fixed Pricing 60000 0.97 1.88 2012 112,800.00 $ 58,200.00 $ 3,933.82 $ 2,458.64 $ 25,254.60 $ 8,798.40 $ 98,645.45 $ 14,154.55 $ 4,000.00 $ 10,154.55 $ 4,480.82 $ 5,673.73 $ 2,269.49 $ 3,404.24 $ 4,000.00 $ 7,404.24 $ 64000 0.98 1.92 2013 122,880.00 $ 62,720.00 $ 4,051.83 $ 2,532.39 $ 28,174,80 S 9,584.64 $ 107,063.67 $ 15,816.33 $ 4,000.00 $ 11,816.33 $ 4,480.82 $ 7.335.51 $ 2,934.21 $ 4,401.31 $ 4,000.00 $ 8,401.31 $ 68000 0.99 1.95 2014 132,600.00 $ 67,320.00 $ 4,173.39 $ 2,608.37 $ 30,888.50 S $ 10.342.80 $ 115,333.05 $ 17,266.95 $ 4,000.00 $ 13,266.95 $ 4,480.82 $ 8.786.13 $ 3,514.45 $ 5,271.68 $ 4,000.00 $ 9,271.68 $ 68000 1 1.99 2015 135,320.00 $ 68,000.00 $ 4,298.59 $ 2,686.62 $ 31,969.60 $ 10,554.95 $ 117,509.77 $ 17,810.23 $ 4,000.00 $ 13,810.23 $ 4,480.82 $ 9,329.11 $ 3,731.77 $ 5,597.65 $ 4,000.00 $ 9,597.65 $ 68000 1.01 2.03 2016 138,040.00 $ 68,680.00 $ 4,427.55 $ 2.767.22 $ 33,088.50 $ 10,767.12 S 119,730.38 $ 18,309.62 S 4,000.00 $ 14,309.62 $ 4,480.82 $ 9,828.80 S 3.931.52 S 5,897.28 $ 4,000.00 $ 9,897.28 $ 68000 1.02 2.07 2017 140,760.00 $ 69,360.00 $ 4,560.37 $ 2,850.23 $ 34,246.60 $ 10,979.28 $ 121,996.48 $ 18,763.52 $ 4,000.00 $ 14,763.52 $ 4,480.82 $ 10,282.70 $ 4,113.08 $ 6,169.62 $ 4,000.00 $ 10,169.62 $ 68000 1.03 2.12 2018 144,160.00 70,040.00 4,697.18 2,935.74 35,445.20 11,244.48 124,362.60 19,797.40 4,000.00 15,797.40 4,480.82 11,316.58 4,526.63 6,789.95 4,000.00 10,789.95