Continue working on Problem 2-3 on page 48.

1. If the discount rate is 18%, what is the NPV of this project? What is the IRR?
2. Conduct a break-even sensitivity analysis and identify the top 3 value drivers

Please use the template to finish this problem

PROBLEM 2-3 Given Solution Legend Growth rate in EBIT for years 1-5 5% = Value given in problem EBIT (year 1) 100,000 = Formula/Calculation/Analysis required CAPEX for year 0 400,000 = Qualitative analysis or Short answer required Depreciable life of fixed assets 5 years = Goal Seek or Solver cell Tax rate 30% = Crystal Ball Input New working capital for years 1-5 20% of EBN = Crystal Ball Output Solution Year 0 2 3 4 5 EBIT S 100,000 S 105,000 S 110,250 S 115,763 S 121,551 Taxes (30,000) (31,500 (33,075 (34,729) (36,465 NOPAT S 70,000 S 73,500 S 77, 175 S 81,034 85,085 Plus: Depreciation 80,000 80,000 80,000 80,000 80,000 Less: CAPEX (400,000) Less: Net working capital needs (See Note 1) (20,000) (1,000) (1,050) (1,103) (1,158) 24,310 Note 1: At the end of year 5 the firm liquidates all of it's investment in net Plus: Salvage value of the fixed assets in operating working capital. year 5 Firm Free Cash Flow (FFCF) $ (420,000) $ 149,000 $ 152,450 $ 156,073 $ 159,876 $ 189,396 Net Fixed Assets (beginning of the year) S 400,000 S 320,000 S 240,000 $ 160,000 S 80,000 Plus: CAPEX 400,000 Less: Depreciation Expense for the Year (80,000) (80,000) (80,000) (80,000) (80,000) Net Fixed Assets (end of the year) $ 400,000 $ 320,000 $ 240,000 $ 160,000 $ 80,000 $ Discount Rate 18.00% NPV IRR Break Even Analysis variable Expected Value Critical Value % of Change EBIT Growth EBIT (1) Tax Rate NWC/EBIT Discount Rate CAPEX for year 0 Please identify the top 3 value drivers