Speedy Partners is an electric scooter manufacturer located in Austin, Texas. The founder of the company recently hired you into the company’s finance department. Speedy Partners currently has one scooter model (Easy Rider 1) on the market, and sales have been excellent. The Easy Rider 1 is a unique item and sales have been strong, however technology changes such as increases in battery power and reducing the scooter weight, have put it at a disadvantage in comparison with newer models. Speedy Partners spent $800,000 to develop a prototype for a scooter with the larger battery power and lighter weight. The company has spent a further $325,000 for a marketing study to determine the expected sales figures for the new scooter. Speedy Partners can manufacture the new scooter for $197 each in variable costs. Fixed costs for the operation are estimated to run $5.7 million per year. The estimated sales volume is 150,000, 170,000, 125,000, 100,000, and 75,000 per year for the next five years, respectively. The unit price of a new scooter will be $495. The necessary equipment can be purchased for $36.5 million and will be depreciated on a seven-year MACRS schedule. It is believed the market value of the equipment in five years will be $14.8 million. As previously stated, Speedy Partners currently manufacturers a scooter – East Rider 1. Production of the existing model is expected to be terminated in two years. If Speedy Partners does not introduce the new scooter, sales will be 85,000 units and 60,000 units for the next two years, respectively. The price of the existing scooter is $435 per unit, with variable costs of $155 each and fixed costs of $3.7 million per year. If Speedy Partners Inc does introduce the new scooter, sales of the existing scooter will fall by 25,000 units per year, and the price of existing units will have to be lowered to $395 each. Net Working Capital for the scooter will be 15% of sales and will occur with the timing of cash flows for the year; for example, there is no initial outlay for networking capital, but changes in net working capital will first occur in year 1 with the first-year sales. Speedy Partners has a 21% corporate tax rate and a required rate of return of 11%. Speedy Partners just paid a dividend of $1.65 per share. The company will increase its dividend by 20% next year and then reduce its dividend growth by five percentage points per year until it reaches the industry average of 5% dividend growth, after which the company will keep a constant growth rate forever. There are currently 10 million shares owned by shareholders of the company. The founder asked you to prepare an excel report that is easy to follow for senior management that shows the key assumptions and calculations to answer the following questions:

1. Calculate and present the cash flows for the project. a. Initial Investments b. Operating Cash Flows c. Terminal Cash Flows

2. Calculate the NPV of the project.

3. Calculate the IRR of the project.

4. Calculate the Payback Period of the project.

5. Calculate the Profitability Index of the project.

6. Calculate what a share of Speedy Partners will sell for today.

7. Calculate and explain the impact of the project NPV on the company’s stock.

8. Explain which of the calculated measures you should pay most attention to. Explain what shortcomings some of the calculations may have.