Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

show work using microsoft excel please also explain step by step process of the work. thank you. B. NPV analysis 1. XYZ forecasts the following

show work using microsoft excel image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
please also explain step by step process of the work. thank you.
B. NPV analysis 1. XYZ forecasts the following for its future operations a) Annual sale of 100,000 memberships at $75 each b) Cost of goods sold of $25 for each membership c) Operating expenses of $3,000,000 per year d) Assume zero net working capital requirements (O inventory, accounts receivable/payable, and cash) e) An initial investment at the beginning of $7,500,000 on servers and computers, which will be depreciated straight-line to zero over the next 7 years f) Tax rate is 35% g) The investment horizon is assumed to be 7 years. After 7 years, this company's free cash flows will terminate. No liquidation value is assumed given the nature of company. 2. Perform a sensitivity analysis for NPV under two parameters: number of memberships sold and operating expenses. There is a link for a Youtube video on the last sheet of the Excel template about "What if analysis that should be helpful. Parameters Market value 3 Stock price (as of today) 4 Number of shares (as of today) 5 Market Capitalization (as of today) 6 Market value of debt 7 Total financing us 166.52 4,730,000,000 787,639,600,000 114,730,000,000 902,369,600,000 00 Cost of capital 10 Daily risk-free rate 11 Estimated future market return 12 Beta using past three months daily returns 13 Estimated cost of equity 14 Estimated cost of debt (annual interest rate on debt) 15 Tax rate 16 WACC 0.0055% 0.0137% 1.68 7.30% 5% 35% 6.79% 20 Source of data: Yahoo Finance; APPLE Historical returns Date Company returns Market returns Company risk premium Market risk premium 11/6/2018 1.08% 0.63% 1.08% 0.62% 11/7/2018 3.03% 2.12% 3.03% 2.12% 11/8/2018 -0.35% -0.25% -0.35% -0.26% 11/9/2018 -1.93% -0.92% -1.93% -0.93% 11/12/2018 -5.04% -1.97% -5.04% -1.98% 11/13/2018 -1.00% -0.15% -1.00% -0.15% 11/14/2018 -2.82% -0.76% -2.83% -0.76% 11/15/2018 2.47% 1.06% 2.46% 1.05% 11/16/2018 1.11% 0.22% 1.10% 0.22% 11/19/2018 -3.96% -1.66% -3.97% -1.67% 11/20/2018 -4.78% -1.82% -4.78% -1.82% 11/21/2018 -0.11% 0.30% -0.12% 0.30% 11/23/2018 -2.54% -0.66% -2.55% -0.66% 11/26/2018 1.35% 1.55% 1.35% 1.55% 11/27/2018 -0.22% 0.33% -0.22% 0.32% 11/28/2018 3.85% 2.30% 3.84% 2.29% 11/29/2018 -0.77% -0.22% -0.77% -0.22% 11/30/2018 -0.54% 0.82% -0.55% 0.81% 12/3/2018 3.49% 1.09% 3.49% 1.09% 12/4/2018 -4.40% -3.24% -4.40% -3.24% 12/6/2018 -1.11% -0.15% -1.12% -0.16% 12/7/2018 -3.57% -2.33% -3.57% -2.34% 12/10/2018 0.66% 0.18% 0.65% 0.17% -0.04% 0.54% -0.02% -1.91% -2.08% 0.01% -1.54% -1.58% -2.06% -2.71% 12/11/2018 12/12/2018 12/13/2018 12/14/2018 12/17/2018 12/18/2018 12/19/2018 12/20/2018 12/21/2018 12/24/2018 12/26/2018 12/27/2018 12/28/2018 12/31/2018 1/2/2019 1/3/2019 1/4/2019 1/7/2019 1/8/2019 1/9/2019 1/10/2019 1/11/2019 1/14/2019 1/15/2019 1/15/2019 -0.57% 10.28% 1.09% -3.20% -0.93% 1.30% -3.12% -2.52% -3.89% -2.59% 17.04% -0.65% 0.05% 0.97% 0.11% -9.96% 4.27% -0.22% 1.91% 1.70% 0.32% -0.98% -1.50% 2.05% 1.22% 4.96% 0.86% -0.12% -0.58% 0.27% 1.09% -3.21% -0.94% 1.29% -3.12% -2.53% -3.90% -2.59% 7.04% -0.65% 0.05% 0.96% 0.11% -9.97% 4.26% -0.23% 1.90% 1.69% 0.31% -0.99% -1.51% 2.04% 1.22% -0.04% 0.54% -0.03% -1.91% -2.08% 0.00% -1.55% -1.58% -2.06% -2.72% 4.95% 0.85% -0.13% 0.84% 0.12% -2.48% 3.43% 0.70% 0.96% 0.40% 0.45% -0.02% -0.53% 1.07% 0.35% 0.13% 2.48% 3.43% 0.706 10.976 0.41% 0.45% -0.01% -0.53% 1.07% 0.22% --- 22 - 0.86% -0.12% 0.85% 0.13% -2.48% 3.43% 0.70% 0.97% 0.41% G 12/27/2018 12/28/2018 12/31/2018 1/2/2019 1/3/2019 1/4/2019 1/7/2019 1/8/2019 1/9/2019 1/10/2019 1/11/2019 1/14/2019 1/15/2019 1/16/2019 1/17/2019 1/18/2019 1/22/2019 1/23/2019 1/24/2019 1/25/2019 1/28/2019 1/29/2019 1/30/2019 1/31/2019 2/1/2019 H -0.65% 0.05% 0.97% 0.11% -9.96% 4.27% -0.22% 1.91% 1.70% 0.32% -0.98% -1.50% 2.05% 1.22% .59% 0.62% -2.24% 0.40% -0.79% 3.31% -0.93% -1.04% 6.83% 0.72% 0.05% -0.65% 0.05% 0.96% 0.11% -9.97% 4.26% -0.23% 1.90% 1.69% 0.31% -0.99% -1.51% 2.04% 1.22% 0.59% 0.61% -2.25% 0.40% -0.80% 3.31% -0.93% -1.04% 6.83% 0.71% 0.04% 0.45% -0.01% -0.53% 1.07% 0.22% 0.76% 1.32% -1.42% 0.22% 0.14% 0.85% -0.78% -0.15% 1.55% 0.86% 0.09% 0.85% -0.13% 0.84% 0.12% -2.48% 3.43% 0.70% 0.96% 0.40% 0.45% -0.02% -0.53% 1.07% 0.22% 0.75% 1.31% -1.42% 0.21% 0.13% 0.84% -0.79% -0.15% 1.55% 0.85% 0.08% 0

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introductory Course On Financial Mathematics

Authors: M V Tretyakov

1st Edition

1908977388, 978-1908977380

More Books

Students also viewed these Finance questions

Question

What is conservative approach ?

Answered: 1 week ago

Question

What are the basic financial decisions ?

Answered: 1 week ago

Question

Understand the different approaches to job design. page 167

Answered: 1 week ago