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!)

Solutions

Expert Solution

jeff jeffy answered 1 year ago

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