Please complete bold numbers for equity analysis of project sheet.

Given values are on the second tab.

Should this project be accepted?

Equity Analysis of a Project INPUT SHEET: USER ENTERS ALL BOLD NUMBERS INITIAL INVESTMENT CASHFLOW DETAILS Initial Investment= $78,000 Revenues in year 1= $40,000 Opportunity cost (if any)= $7,484 Var. Expenses as % of Rev= Lifetime of the investment 10 50% Fixed expenses in year 1= 0 Salvage Value at end of project= $10,000 Deprec. method(1:St.line;2:DDB) 2 If you do not have the breakdown of fixed and variable 10% expenses, input the entire expense as a % of revenues. Tax Credit (if any )= Other invest.(non-depreciable)= Tax rate on net income= 40% 0 WORKING CAPITAL Initial Investment in Work. Cap= $10,000 Working Capital as % of Rev= 25% Salvageable fraction at end= 100% GROWTH RATES 1 2 3 4 5 Revenues Do not enter 10.00% 10.00% 10.00% 10.00% Fixed Expenses Do not enter 10.00% 10.00% 10.00% 10.00% Default: The fixed expense growth rate is set equal to the growth rate in revenues by default. YEAR 0 1 2 3 INITIAL INVESTMENT Investment $78,000 - Tax Credit $7,800 Net Investment $70,200 + Working Cap $10,000 + Opp. Cost $7,484 + Other invest. $0 Initial Investment$87,684 4 5 SALVAGE VALUE Equipment Working Capital $0 $0 OPERATING CASHFLOWS Lifetime Index Revenues -Var. Expenses - Fixed Expenses EBITDA - Depreciation 1 1 1 1 1 $40,000 $44,000 $48,400 $53,240 $58,564 $20,000 $22,000 $24,200 $26,620 $29,282 $0 $0 $0 $0 $0 $20,000 $22,000 $24,200 $26,620 $29,282 $15,600 $12,480 $9,984 $7,987 $6,390 $0 $0 $0 $0 $0 $0 $0 $0 EBIT -Tax EBIT(1-t) + Depreciation - Work. Cap NATCF ($87,684) Discount Factor 1 Discounted CF ($87,684) $4,400 $14,216 $5,686 $2,640 $5,712 $8,530 $15,600 $12,480 $9,984 $0 $1,000 $1,100 $18,240 $17,192 $17,414 1.10685 1.225116923 1.356020666 $16,479 $14,033 $12,842 $1,760 $9,520 $3,808 $18,633 $7,453 $11,180 $7,987 $1,210 $17,957 1.500911474 $11,964 $22,892 $9,157 $13,735 $6,390 $1,331 $18,794 1.661283865 $11,313 Investment Measures NPV = $30,258 IRR = 16.11% ROC = 34.56% Book Value (beginning) Depreciation BV(ending) $78,000 BOOK VALUE & DEPRECIATION $78,000 $62,400 $49,920 $39,936 $31,949 $15,600 $12,480 $9,984 $7,987 $6,390 $62,400 $49,920 $39,936 $31,949 $25,559 a Project S ALL BOLD NUMBERS DISCOUNT RATE Approach(1:Direct;2:CAPM)= 2 1. Discount rate = 10% 2a. Beta 0.9 b. Riskless rate= 8.00% of fixed and variable c. Market risk premium = 5.50% as a % of revenues. d. Debt Ratio = 30.00% e. Cost of Borrowing = 9.00% Discount rate used= 10.69% $0 $0 1 6 7 8 9 10 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 6 7 8 9 10 $0 $0 $0 $0 $0 $0 $10,000 $14,641 1 1 1 1 $58,564 $58,564 $58,564 $58,564 $58,564 $29,282 $29,282 $29,282 $29,282 $29,282 $0 $0 $0 $0 $0 $29,282 $29,282 $29,282 $29,282 $29,282 $5,112 $4,089 $3,272 $2,617 $469 $24,170 $9,668 $14,502 $5,112 $0 $19,614 1.838792046 $10,667 $25,559 $25,193 $10,077 $15,116 $4,089 $0 $19,205 2.035266976 $9,436 $26,010 $10,404 $15,606 $3,272 $0 $18,878 2.252735252 $8,380 $26,665 $10,666 $15,999 $2,617 $0 $18,616 2.493440014 $7,466 $28,813 $11,525 $17,288 $469 $0 $17,757 2.759864079 $15,362 $20,447 $16,358 $13,086 $10,469 $5,112 $4,089 $3,272 $2,617 $469 $20,447 $16,358 $13,086 $10,469 $10,000 Cost of the new project $82,000 Installation costs $13,000 Estimated unit sales in yea230 Estimated sales price in ye$210 Variable cost per unit 50% Fixed cost year 1 $6,000 Initial working capital nee $8,,000 Working Capital needs 9% of sales each year Depreciation method 10 years straight-line method, no salvage Crescent's tax rate 39% Crescent's discount 12% Beta 1.3 Risk Free Rate 3% Risk Premium 5% Debt Ratio 20% Cost of Borrowing 7%