Question: Help solve for the highlighted section below with the '0.00%' Please include equations helped to solve and steps. 'Discount rates applied to the CFs:' Alternative
Help solve for the highlighted section below with the '0.00%'
- Please include equations helped to solve and steps.
'Discount rates applied to the CFs:'
Alternative 1:
Alternative 2:
Alternative 3:
In-house cash flows:
External cash flows:



Current (2017) Costs and Values: Annual lease costs $20,000 Annual utilities/insurance $2,400 Annual labor $50,000 Annual material costs $142,790 Annual depreciation expense $40,000 Market value of existing equipment $650,000 New Costs: Added (incremental) lease costs $15.000 Building remodeling $30,000 Equipment investment $217,600 Annual depreciation $25,000 Added annual labor costs $98.400 Added annual utilities/insurance $1,200 Annual vehicle expense $2,000 Marketing of external printing $6,000 Incremental Savings: Graphics printing $119,000 Forms printing $349,080 Profits on Commercial Printing: Pretax profits for 2018 $80,000 Pretax profits for 2019 $100,000 Long-term profit growth rate 5.0% Discount Rates Applied to the CFS: Alternative 1 0.0% Alternative 2 0.0% Alternative 3 In-house cash flows 0.0% External cash flows 0.0%\fINPUT DATA: General: Projected general inflation rate 3.0% Projected printing volume increase 2.0% Supplies as % of billing 30.0% Divisional Cost of Capital Data: Overall corporate 8.0% FP subsidiary (PROPERTIES) Debt weight 75.0% Cost of debt 7.5% Equity weight 25.0% Cost of equity 17.0% Tax rate 40.0% NFP subsidiary (SUPPORT) Debt weight 60.0% Cost of debt 5.5% Equity weight 40.0% Cost of equity 13.0% Page 1
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