1. What is the net present value (NPV) and internal rate of return (IRR) for the investment? How do you interpret these numbers?

Free Cash Flow

(16,000,000)

400,000

3,900,000

4,500,000

4,500,000

4,500,000

EXHIBIT 18.1 | Cost-of-Capital Information Interest Rates: January 15, 2016 Bank loan rates (LIBOR) Market risk premium 1-year 1.15% Historical average 6.0% Government bonds Corporate bonds (10-year maturities) 1-year 5-year 10-year 30-year 0.49% 1.46% 2.04% 2.82% 2.45% 3.38% 3.85% 5.05% A Baa Worldwide Paper Financial Data Balance-sheet accounts (in millions of dollars) Bank loan payable (LIBOR + 1%) Long-term debt Common equity Retained earnings 500 2,500 500 2.000 Per-share data Shares outstanding (millions) Book value per share Recent market value per share 500 $ 5.00 $24.00 Other Bond rating Beta A 1.10 Source: Datastream