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Designer Womens Tops was expected to sell for $ 106 per unit and had projected sales of 6000 units in the first year, with a projected (Most-Likely scenario) 22.0 % growth rate per year for subsequent years. A total investment of $ 1,053,000 for new equipment was required. The equipment had fixed maintenance contracts of $ 305,749 per year with a salvage value of $ 154,229 and variable costs were 9 % of revenues. Shantel also needed to consider both the Best-Case and Worst-Case scenarios in the analysis with growth rates of 32.00 % and 2.20 % respectively. The new equipment would be depreciated to zero using straight line depreciation. The new project required an increase in working capital of $ 155,960 and $ 17,156 of this increase would be offset with accounts payable.

PSUWC currently has 1180000 shares of stock outstanding at a current price of $ 76.00. Even though the company has outstanding stock, it is not publicly traded and therefore there is no publicly available financial information. However, after analysis management believes that its equity beta is 1.00. The company also has 101000 bonds outstanding, with a current price of $ 965.00. The bonds pay interest semi-annually at a coupon rate of 6.80 %. The bonds have a par value of $1,000 and will mature in 8 years. The average corporate tax rate was 32 %.

I. Given the following data on proposed capital budgeting project. I. Given the following data on proposed capital budgeting project