CLI Electric uses only 45% debt and 55% common equity. You can borrow unlimited amounts at a pre-tax interest rate of 14%. Its last dividend paid was $8, it estimates a growth rate of 4% per year, and its current share price is $80. His tax rate is 30% and he is expected to have $2 million of retained earnings this year. If it issues new common equity it would have 10% float costs.

1- Determine the intervals and corresponding CCPP.

2- Based on the possible variation of the estimated sales, three possible scenarios are presented with their probability of occurrence.

Type

Optimistic scenario - sales 750000 Probability .25

medium scenario - sales 680000 Probability .55

Pessimistic scenario - sales 590000 Probability .20

3. Determines the individual risk of the project (NPV variation coefficient). The additional data of the project are the following:

Compare equipment and machinery: $620,000

Installation expense: $24,000

Training expense: $5,000

CNT cost: $30,000

Shelf life: 6 years Salvage value: $35,000

Depreciation: straight line for the 6 years Sales: 680,000 (sale price $680, 1000 units)

Variable costs correspond to 35% of the unit sales price

Fixed costs for each year are $52,200

4. Build a CLI VPN confidence interval at 95% confidence.

IN EXCEL