QUESTION 2:

COPY AND PASTE THE FOLLOWING CAPITAL BUDGETING QUESTION INTO A WORKSHEET AND ANSWER USING EXCEL. SHOW ALL YOUR WORK INCLUDING UNDERLYING FORMULAS.

Disney Corporation has a new project with an economic life of 5 years. The project requires an initial investment of $200,000 at time 0. This investment can be depreciated at the following annual rates: Year 1: 20%, Year 2: 32%, Year 3: 25%, Year 4: 12%, and Year 5: 11%

Also, the price of the product is forecasted to increase by 5% every year from an initial $9 at time 1. Quantity is predicted to be 40,000 units in the first period and expected to increase 3% every year. The projects operating costs per unit is forecasted to be $6 for the first year, and expected to go up by 10% every year. After six years, the projects estimated salvage value is $20,000. NWC at time 0 is $50,000 and expected to increase by 20% every year. The companys WACC is 10%, and its corporate tax rate is 40 percent.

Find NPV, IRR, MIRR, and PI and decide if Disney should accept this project. Show all your work in Excel.