After many years trying to come up with an experience retail concept, you have finally found one. Its calledThe Guild. Building the Guild will cost approximately $17,000,000. It will include a number of pieces of machinery which in total cost $3,500,000 and training for the equipment will be an additional $3,000,000.

In order to run the business, inventory will need to be increased by $5,000,000.

The guild is expected to generate $20,000,000million in revenue in its first year of operation. Each year the companys revenue will grow by 12%.

The companys cost of goods sold are 23% of sales while its total operating costs are $5,000,000. Most companies like the Guild trade at 5 times after tax cash flow. Use this multiple to calculate the terminal value for the company.

The company will have a tax rate of 25%.

The guild has a three part capital structure with common equity, preferred equity, and debt. The expected return on the stock market is9.6% and the 10-year government bond is currently yielding 3.2%. Companies like The Guild have a beta of 1.1.

Bonds for The Guild are currently trading at 85% of their par value, with a ten-year maturity, and a 6% coupon, paid semiannually.

Preferred stock trades at $12 per share and pays a dividend of $1.25 per share.The companys capital structure is 30% common equity, 10% preferred equity, and 60% debt.

1.Layout all the companys cash flows.

2.Calculate the NPV, IRR, and Payback period.

A B D E F G H J K 2 3 4 The Guild 5 Name: 6 7 Year 0 Year 1 Year 2 Year Year 3 Year 4 Year 5 Label Construction Costs Machinery Training Depreciable Base Depreciation Label Revenues Cost of Goods Sold Operating Costs |EBIT After Tax EBIT Depreciation After Tax Cash Flow Working Capital (inventory) Period 0 Cash Flow Year 6 Year 7 Year 8 Year 9 Year 10 8 9 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Label Revenues Cost of Goods Sold Operating Costs EBIT After Tax EBIT Depreciation After Tax Cash Flow Cost of Preferred Equity Cost of Debt Cost of Debt Price nper pmt par rd Cost of Common Equity CFO CF1 CF2 CF3 CF4 CFS CF6 CF7 CF8 CF9 CF10 Price Depreciable Base Dividend CFO rpe NPV IRR Payback |ri Terminal Value beta Cost of Preferred Equity MRP Cost of Equity E[r]m Cost of Debt rce WACC Include ALL Financial Statement Items Required to Calculate After Tax Cash Flow. Be Sure to provide labels for cach. 34 35 36 37 38 39 40 41 42 43 44 45 46 47 A B D E F G H J K 2 3 4 The Guild 5 Name: 6 7 Year 0 Year 1 Year 2 Year Year 3 Year 4 Year 5 Label Construction Costs Machinery Training Depreciable Base Depreciation Label Revenues Cost of Goods Sold Operating Costs |EBIT After Tax EBIT Depreciation After Tax Cash Flow Working Capital (inventory) Period 0 Cash Flow Year 6 Year 7 Year 8 Year 9 Year 10 8 9 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Label Revenues Cost of Goods Sold Operating Costs EBIT After Tax EBIT Depreciation After Tax Cash Flow Cost of Preferred Equity Cost of Debt Cost of Debt Price nper pmt par rd Cost of Common Equity CFO CF1 CF2 CF3 CF4 CFS CF6 CF7 CF8 CF9 CF10 Price Depreciable Base Dividend CFO rpe NPV IRR Payback |ri Terminal Value beta Cost of Preferred Equity MRP Cost of Equity E[r]m Cost of Debt rce WACC Include ALL Financial Statement Items Required to Calculate After Tax Cash Flow. Be Sure to provide labels for cach. 34 35 36 37 38 39 40 41 42 43 44 45 46 47