Question 1 A project, that consists of just readjusting some parts to adapt them to assemble to electric cars, would produce net revenues of $180,000 per year, for 10 years Assuming that these revenues will grow at a constant 2 per year, and are assessed at a cost of capital of 4 Would it still be profitable if it required an initial investment of $1,500,000 If we take these annual revenues of $180,000 growing at a 2 per year, and we invest them in a bank account that offers an annual rate of 5 for 10 years, how much will we have at the end (25 ) Question 2 After these previous calculations, the project still requires a big initial investment, and other options are being considered We were considering adapting our production line, in order to produce some parts for electric automobiles, this way, and after analyzing the possible market opportunities, we could expect to obtain net revenues of $35,000 per quarter for at least the next 10 years What is the maximum that we should invest on this project if we consider a cost of capital of 4 If we ask for a loan of 1,000,000 at an annual interest rate of 2 compounded semiannually, to be paid in 10 years, how much would you have to pay every semester to cover the loan (25 ) Question 3 A potential client has offered the possibility to sign a contract, starting in 5 years, with a duration of 8 years (so it will produce 8 payments), to purchase a specific part that we can produce, but that will require a total reconversion of the whole factory This contract is signed for annual revenues of $500,000 To do this, we must replace the machinery and the production plant must be reconverted What is the maximum amount of money we could afford to invest if we want a profitability of at least 5 If we ask for a loan to be paid back in 5 years in constant equal monthly payments of $20,000, how much will we pay in total for the loan (25 ) Question 4 Finally, there is a last consideration Selling the company Considering that our plant produces annual cashflows of $240,000 increasing at a 0,5 annual, expected to last for many years, for how much should we value the company today if investors are willing to obtain a profitability of 4

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Question 1 A project, that consists of just readjusting some parts to adapt them to assemble to electric cars, would produce net revenues of $180,000

Question 1

A project, that consists of just readjusting some parts to adapt them to assemble to electric cars, would produce net revenues of $180,000 per year, for 10 years. Assuming that these revenues will grow at a constant 2% per year, and are assessed at a cost of capital of 4%:

Would it still be profitable if it required an initial investment of $1,500,000?

If we take these annual revenues of $180,000 growing at a 2% per year, and we invest them in a bank account that offers an annual rate of 5% for 10 years, how much will we have at the end?

(25%)

Question 2

After these previous calculations, the project still requires a big initial investment, and other options are being considered. We were considering adapting our production line, in order to produce some parts for electric automobiles, this way, and after analyzing the possible market opportunities, we could expect to obtain net revenues of $35,000 per quarter for at least the next 10 years.

What is the maximum that we should invest on this project if we consider a cost of capital of 4%?

If we ask for a loan of 1,000,000 at an annual interest rate of 2% compounded semiannually, to be paid in 10 years, how much would you have to pay every semester to cover the loan?

(25%)

Question 3

A potential client has offered the possibility to sign a contract, starting in 5 years, with a duration of 8 years (so it will produce 8 payments), to purchase a specific part that we can produce, but that will require a total reconversion of the whole factory. This contract is signed for annual revenues of $500,000. To do this, we must replace the machinery and the production plant must be reconverted.

What is the maximum amount of money we could afford to invest if we want a profitability of at least 5%?

If we ask for a loan to be paid back in 5 years in constant equal monthly payments of $20,000, how much will we pay in total for the loan?

(25%)

Question 4

Finally, there is a last consideration:

Selling the company: Considering that our plant produces annual cashflows of $240,000 increasing at a 0,5% annual, expected to last for many years, for how much should we value the company today if investors are willing to obtain a profitability of 4%?