Winston & Company, Inc Balance Sheet Assets: Liabilities: Current Assets $995,000 Accounts Payable $300,000 Notes Payable $700,000 Fixed Assets $3,000,000 Other Current Liabilities $195,000 Bonds Payable $1,200,000 Total Liabilities $2,395,000 Equity $1,600,000 Total Assets: $3,995,000 $3,995,000

Current Market Information: 700 Bonds - $1,000 20 years, 10 % stated rate, issued 8 years ago currently selling at .97 500 Bonds - $1,000, 10 years, 15% stated rate, issued 3 years ago currently selling at 1.05 100,000 shares of common stock currently selling for $21.00 per share. Financial Analysis: b = 1.15, RM = 22% RRF = 2.5% Tax Rate = 40% Lender

Requirements: Funds will only be distributed in even amounts of $50,000. (50,000, 100,000, 150,000, etc.) If AFN > $200,000 then the Pre-tax Cost of debt will be 15%; otherwise, it will be 18%. Project Term: 5 years Outlay: $500,000 for Equipment, depreciable over 5 years, salvage value of $30,000 $200,000 lost opportunity with an existing vendor $100,000 required NWC recoverable in Year 5. In the first year, sales will increase $1,400,000. Sales are currently $14,000,000. The current profit margin is 20% and the payout ratio is 30%. After Year 1, it is likely that sales will grow 5% per year, and Cost of Goods Sold will grow by 2% per year. The company will need to borrow any funds identified through AFN analysis. 1. AFN Analysis 2. WACC 3. Cash Flow 4. NPV