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Start with the partial model in the file Ch 1 3 P 1 8 Build a Model.xlsx . Webmasters.com has developed a powerful new server
Start with the partial model in the file Ch P Build a Model.xlsx Webmasters.com has developed a powerful new server that would be used for corporations' Internet activities. It would cost $ million at Year to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to of the year's projected sales; for example, NWCSales The servers would sell for $ per unit, and Webmasters believes that variable costs would amount to $ per unit. After Year the sales price and variable costs will increase at the inflation rate of The company's nonvariable costs would be $ million at Year and would increase with inflation.
The server project would have a life of years. If the project is undertaken, it must be continued for the entire years. Also, the project's returns are expected to be highly correlated with returns on the firm's other assets. The firm believes it could sell units per year.
The equipment would be depreciated over a year period, using MACRS rates. The estimated market value of the equipment at the end of the project's year life is $ Webmasters.com's federalplusstate tax rate is Its cost of capital is for averagerisk projects, defined as projects with a coefficient of variation of NPV between and Lowrisk projects are evaluated with a project cost of capital and highrisk projects at
The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations.
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