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What would this look like in an Excel spreadsheet? PolarTech Inc. is considering producing a new widget. The production equipment, costing $12 million, will depreciate

What would this look like in an Excel spreadsheet?

PolarTech Inc. is considering producing a new widget. The production equipment, costing $12 million, will depreciate over a six-year period. Upon full depreciation, the equipment's resale value is estimated at $2.5 million. The widget's retail price is $200, with an anticipated annual sales volume of 150,000 units. Fixed costs are projected at $900,000 annually, and variable costs amount to $15 per widget. Initial project startup requires a net working capital investment of $1,200,000. No additional working capital is needed during the project. The applicable tax rate is 25%. Calculate the IRRs and NPVs for this project using the WACCs under the following scenarios. (WACC you calculate in "a" and WACC you calculate in "b")

a) PolarTech Inc. can obtain debt funding at 8 percent. Its marginal income tax rate is 25 percent. The yield on US Treasury securities is 3 percent. The market risk premium is 6.0 percent, and the firm's beta is 2. It has a targeted debt-to-equity ratio of 1:1 (50 percent debt, 50 percent equity).

b) PolarTech Inc. can obtain debt funding at 8 percent. Its marginal income tax rate is 25 percent. The yield on US Treasury securities is 3 percent.

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