Question: Breakers Incorporated is considering a six year project with the following information: Initial fixed asset investment $ 2 1 0 , 0 0 0 ;

Breakers Incorporated is considering a six year project with the following information: Initial fixed asset investment $210,000; straight line depreciation to zero over its six year life, no residual value Price: $180 per unit Fixed costs per year: $720,000(before acquiring the fixed asset above) Units sold per year: 25,500 Variable cost: $110 per unit Tax rate: 40% Using Excel, complete each of the following in the same Excel spreadsheet file: 1. Based on the information above, construct a proforma income statement for Breakers Incorporated (be sure to include the newly acquired fixed asset). This is the base case scenario. What is the operating cash flow (OCF) for each year? 2. Suppose that price, fixed costs, variable costs, and units sold are accurate to within plus or minus 12%. Construct proforma income statements for both the worst case scenario and the best case scenario. What is the operating cash flow (OCF) for each year under each scenario? 3. Using an Excel formula, compute the Net Present Value for each of the three scenarios (base case, worst case, and best case). Use a discount rate of 15% for each scenario. .4. Using an Excel formula, compute the Internal Rate of Return for each of the three scenarios (base case, worst case, and best case)..5. Breakers Incorporated will be financing the initial investment of $210,000 by issuing a bond with a face value of $200,000. The bond pays an annual coupon rate of 15% and will mature in six years. Using an Excel formula, compute the bond yield.

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