A company is considering the below project which is expected to have the below first year

(t

)

=

(

1)

financial information (only net working capital is due immediately, i.e, at

t=0

):\ Revenue:

$58

million\ EBITDA: $16 million\ Depreciation and Amortization:

$2.5

million\ Capital Expenditure:

$2

million\ Tax rate:

40%

\ Net working Capital at

t=0

only:

$7

million (the NWC will be recovered at the end of the project, i.e., the

$7

million will be recovered at

t=10

)\ It is expected that over 10 years the EBITDA margin will increase by

0.4%

a year, while depreciation and cap-ex remain a constant

%

of revenues. Revenues will grow by

3%

a year (after 10 years, the project is completed and NWC is recovered).\ Required rate of return is

11%

.\ Q16:\ At what initial cost (maximum) you would accept the project? (10 points)

A company is considering the below project which is expected to have the below first year (t=1 ) financial information (only net working capital is due immediately, i.e, at t=0 ): Revenue: \$58 million EBITDA: \$16 million Depreciation and Amortization: \$2.5 million Capital Expenditure: $2 million Tax rate: 40% Net working Capital at t=0 only: $7 million (the NWC will be recovered at the end of the project, i.e., the $7 million will be recovered at t=10 ) It is expected that over 10 years the EBITDA margin will increase by 0.4% a year, while depreciation and cap-ex remain a constant % of revenues. Revenues will grow by 3% a year (after 10 years, the project is completed and NWC is recovered). Required rate of return is 11%. Q16: At what initial cost (maximum) you would accept the project? (10 points)