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, R_M = 22% R_RF = 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: 9 Years

Outlay: $1,500,000 for Equipment, depreciable over 10 years, salvage value $160,000

$600,000 lost opportunity with an existing vendor

$250,000 required NWC recoverable in Year 9

$250,000 required in Year 5 to repair and maintain equipment

In the first year, sales will increase $1,950,000. Sales are currently $14,000,000. The current profit

Margin is 30% and the payout ratio is 55%. After Year 1, it is likely that sales will grow 7% per year;

And Cost Of Goods Sold will grow by 2% per year. The company will need to borrow any funds

identified through the AFN analysis.

• 1. AFN analysis
• 2. WACC
• 3. Cash Flow analysis
• 4. NPV Analysis