Visby Rides, a limousine hire company, is considering buying some new luxury cars. After extensive research, they come up with the below estimates of free cash flow from this project. By how much could the opportunity cost of capital rise before the net present value (NPV) of this project is zero, given that it is currently 10%?
 

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Revenues - Cost of Goods Sold - Depreciation = EBIT -Taxes (35%) = Unlevered net income + Depreciation - Additions to Net Working Capital - Capital Expenditures F= Free Cash Flow Year O -350,000 Year 1 411,771.414 Year 2 411,771.414 -155,000 -155,000 85,000 -85,000 -20,000 171,771.414 171,771.414 171,771.414 -60,119.9948 -60,119.9948 60,119.9948 111,651.419 111,651.419 111,651.419 85,000 85,000 85,000 -20,000 Year 3 411,771.414 176,651.419 176,651.419 -155,000 85,000 -20,000 176,651.419 Revenues - Cost of Goods Sold - Depreciation = EBIT -Taxes (35%) = Unlevered net income + Depreciation - Additions to Net Working Capital - Capital Expenditures F= Free Cash Flow Year O -350,000 Year 1 411,771.414 Year 2 411,771.414 -155,000 -155,000 85,000 -85,000 -20,000 171,771.414 171,771.414 171,771.414 -60,119.9948 -60,119.9948 60,119.9948 111,651.419 111,651.419 111,651.419 85,000 85,000 85,000 -20,000 Year 3 411,771.414 176,651.419 176,651.419 -155,000 85,000 -20,000 176,651.419

Answer rating: 100% (QA)

SOLUTION To calculate the opportunity cost of capital at which the net present value NPV of the proj... View the full answer