Company ABC is looking at doing the below project which is expected to have the below 1st
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Question:
Company ABC is looking at doing the below project which is expected to have the below 1st year financials, Net working capital is paid at time zero.
- Revenue: $58M
- EBITDA: $14M
- Depreciation: $2.5M
- CAPEX: $2M
- Net working capital: $7M
- Tax Rate: 30%
It is expected that over 10 years the EBITDA margin will increase by 0.4% a year while depreciation, CAPEX, and Net working capital will remain a constant % of sales, Revenue will grow by 3% a year.
After 10 years of business the project will be finished and Net Working Capital returned.
If your require rate of return is 11% at what initial cost would you accept the project?
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0133400694
1st canadian edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi
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