1. NPV analysis

WACC = -3.2860%

StrawHat forecasts the following for its future operations.

1. Annual sale of 100,000 memberships at $75 each.
2. Cost of goods sold of $25 for each membership.
3. Operating expenses of $3,000,000 per year.
4. Assume zero net working capital requirements (0 inventory, accounts receivable/payable, and cash).
5. An initial investment at the beginning of $7,500,000 on servers and computers, which will be depreciated straight-line to zero over the next 7 years.
6. Tax rate is 35%.
7. The investment horizon is assumed to be 7 years. After 7 years, this companys free cash flows will terminate. No liquidation value is assumed given the nature of company.

use Excel like:

Discounted Cash Flow (12C Template Parameters Year D 7 Rece 1 S5,000,000 S2,400,000 2 $5,000,000 $2,400,000 3 35,000 $2,400.000 4 $6,000.00 $2.400.000 5 $5,000,000 $2,400,000 2 Tinirs Sold Wulesale Prix Production Cost 100,000 $50.00 $24.00 COGS Grass profit S2.600,000 $2,600,000 $2,600.00 $2. $2.000 30 Coat of Capital 100% Capital Lixpenditure PP& Life 7/OXXO 7 7 SG&A RAD Depreciation MARS dep SI XHUXO $1,714.300 $1,0 $1,224.300 $1,000,000 S874.300 $1.000 $625.100 $1.00LONI $624,4001 $1,000CMX) $625,100 SIMO $312.0 S1.000.00 EBIT EBIT uk S1.000.000 $885.0 $1,600,000 $1,375,700 $1,600 $1,725, 700 $1 Moon $1,974.800 $1.00 $1,975.00 -$ $1.000.000 -$625,100 -S1,000,000 -$312.200 Not Working Capital Cash Req Inventory Reg Receivable Reu Payables Rai 2.00% 2.00% 15006 150% - $1,000,000 Inerme Tax Income Tax alt 92 $400,120 $640,000 $354,290 S. $590,290 SAXO S/790.290 $400 mg - $230,040 - $400,00 -$124,890 $789.900 3790240 Marginal Tax Rate MACRS depreciation rates (7) larnings Earnings alt yo $600,180 $ WKI $531,420 SW60, $825,420 SONO $1,035.420 $960,000 $1.184.900 $960,000 $1.185.160 $600,00 -$375,050 $600KN -$187,320 * Depreciation MM Rs dep Capital Expenditure $0 $1,000, $7,000,000 $1,000,000 S1,714,30) $1,000,000 $1,224,300 $1.000.000 $ 5874,00 $1.000.000 $625.100 $1.000L, OKNO $624,400 $1,000,000 $125,100) S1,000,000 $312.) $ 14.20 24.49% 17.49% 1249% 899% R92% % 893% 30 $ $0 $ 31000 $100 $0 $0 Carl Inventory Rectwalls Payables NWC Change in NWC $100,00 $1001/ $750,000 $360,000 $3200000 $590,000 $100,000 S100,000 $750,000 $350,000 $390,000 $0 $ S100,000 SIOON S750,000 SX0.000 S390,000 $ $0 $100,000 $100.000 $750,000 $360,000 $590,000 SO $360.000 $590,000 SO 3 $0 $0 $0 $50,000 Free Cash Flow Tree: Cash Flow alt $7,000,000 - $6,599,880 $1,370,000 $1,655,721) $ $1,960,000 $2,049,730 $1,960,000 $1,9079,720 $1.900.000 $1.8100 $1.95 OKNO $1,809,760 $ $990,000 $840,0461 $100,000 $124 880 $ Cost of Capital 10.XX NPV NPV ak TRR IRR ult $657.671 $932.468 13.09% 14.94%