Question
You decide to start a baking company and run it for the next five years. To start the company, you need to buy a new
You decide to start a baking company and run it for the next five years. To start the company, you need to buy a new commercial grade oven for $200,000 (t=0). Each year, you believe you can sell 10,000 loaves of bread and charge $5 per loaf (t=1 thru 5). Each year, you will also have to pay an assistant $15,000 and for space at the farmers market which will cost $1,000 (t=1 thru 5) treat these as costs not NWC or CAPEX. Finally, you will depreciate the oven by $20,000 each year (t=1 thru 5), and, after 5 years, the oven will be can be sold for $90,000 (t=5). The tax rate for your moving company is 25% and the discount rate is 10%.
What is FCF_5?
What is the NPV of this bakery project?
Suppose Dell Inc is currently has a debt to equity ratio of 1:2. The cost of debt is 5%, the cost of equity is 16%, and the tax rate is 20%.
If Dell had no debt and was 100% equity financed, what would the cost of equity (r_e)?
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