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A firm has projected the following financials for a possible project: Year 0 1 2 3...

A firm has projected the following financials for a possible project:

Year 0 1 2 3 4 5
Sales 128,086 128,086 128,086 128,086 128,086
COGS 60,876 60,876 60,876 60,876 60,876
S&A 30,000 30,000 30,000 30,000 30,000
Depreciation 22,696.80 22,696.80 22,696.80 22,696.80 22,696.80
Investment in NWC 1,126.00 598 598 598 598 598
Investment in Gross PPE 113,484.00

The firm has a capital structure of 36.00% debt and 64.00% equity. The cost of debt is 10.00%, while the cost of equity is estimated at 12.00%. The tax rate facing the firm is 37.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year)

What is the WACC for the project?

What is the cash flow for year 0? (express answer as a negative...)

What is the cash flow for year 1?

What is the NPV of the project? (Hint: Be careful about rounding the WACC here!)

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Expert Solution

jeff jeffy answered 2 years ago
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