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​ Year 0 Year 1 Year 2 Year 3 Revenues ​ 363,688.342​ 363,688.342​ 363,688.342​ - Cost...

​ Year 0 Year 1 Year 2 Year 3
Revenues ​ 363,688.342​ 363,688.342​ 363,688.342​
- Cost of Goods Sold ​ -150,000 -150,000 -150,000
- Depreciation -80,000 -80,000 -80,000
= EBIT ​ 133,688.342​ 133,688.342 133,688.342
- Taxes (35%)   -46,790.9196 -46,790.9196 -46,790.9196
= Unlevered net income ​ 86,897.4221 86,897.4221 86,897.4221
+ Depreciation ​ 80,000 80,000 80,000
- Additions to Net Working Capital ​ -20,000 -20,000 -20,000
- Capital Expenditures -300,000  
= Free Cash Flow ​ 146,897.422 146,897.422 146,897.422


Visby Rides, a livery car company, is considering buying some new luxury cars. After extensive research, they come up with the above estimates of free cash flow from this project. By how much could the discount rate rise before the net present value (NPV) of this project is zero, given that it is currently 10%?

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27

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Expert Solution

jeff jeffy answered 1 year ago
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