| 1) |
| Weights of debt | 70% |
| weights of common equity | 30% |
| Tax rate | 35% |
| cost of debt | 10% |
| beta | 1.20 |
| risk free rate | 2% |
| return on the market | 12% |
| Cost of debt | 6.5% |
| Cost of equity | 14.0% |
| WACC | 8.75% |
| 2) |
| Initial investment outlay | 25 | million |
| Machinery | 20 | million |
| Net working capital | 2 | million |
| crystals | 3 | million |
| Project and equipment life | 5 | years |
| Revenues are expected to increase | 25 | million annually |
| Gross margin | 40% |
| Selling, general, and administrative expenses are | 5% | of sales |
| Tax rate | 35% |
| Cash Flow | 0 | 1 | 2 | 3 | 4 | 5 |
| Initial investment outlay | ($25.00) |
| Revenues | | $25.00 | $25.00 | $25.00 | $25.00 | $25.00 |
| Gross margin | | $10.00 | $10.00 | $10.00 | $10.00 | $10.00 |
| Selling, general, and administrative expenses | | $1.25 | $1.25 | $1.25 | $1.25 | $1.25 |
| Depreciation | | $4.00 | $4.00 | $4.00 | $4.00 | $4.00 |
| Net woking capital recovery | | $0.00 | $0.00 | $0.00 | $0.00 | $5.00 |
| Cash Flow | ($25.00) | $7.09 | $7.09 | $7.09 | $7.09 | $12.09 |
| NPV | $6.03 |
| IRR | 16.93% |
| 3) |
| Year | 0 | 1 | 2 | 3 |
| Initial investment outlay | ($25.00) |
| Revenues | | $25.00 | $25.00 | $25.00 |
| Gross margin | | $10.00 | $10.00 | $10.00 |
| Selling, general, and administrative expenses | | $1.25 | $1.25 | $1.25 |
| Depreciation | | $6.67 | $6.67 | $6.67 |
| Net woking capital recovery | | $0.00 | $0.00 | $5.00 |
| Cash Flow | ($25.00) | $8.02 | $8.02 | $13.02 |
| NPV | ($0.72) |
| IRR | 7.26% |
songsongsong
short_paper_calculation.xlsx
