please show excel formulas and inputs

H 1 NAME: 2 Chapter: 13 Estimating Cash Flows and Analyzing Risk - 65 points 3 Problem: 18 4 5 6 Webmasters.com has developed a powerful new server that would be used for corporations Internet activities. It 7 would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to 10% of the year's projected sales; f example, NWC, = 10%(Sales). The servers would sell for $24,000 per unit, and Webmasters believes that variable 9 costs would amount to $17,500 per unit. After Year 1, the sales price and variable costs will increase at the inflatior rate of 3%. The company's nonvariable costs would be $1 million at Year 1 and would increase with inflation. 8 10 11 12 13 The server project would have a life of 4 years. If the project is undertaken, it must be continued for the entire 4 14 years. Also, the project's returns are expected to be highly correlated with returns on the firm's other assets. The 15 firm believes it could sell 1,000 units per year. 16 19 17 The equipment would be depreciated over a 5-year period, using MACRS rates. The estimated market value of the 18 equipment at the end of the project's 4-year life is $500,000. Webmasters' federal-plus-state tax rate is 40%. Its cost of capital is 10% for average-risk projects, defined as projects with a coefficient of variation of NPV between 0.8 and 20 1.2. Low-risk projects are evaluated with a WACC of 8%, and high-risk projects at 13%. 21 22 HINTS: Required level of net operating working capital should = NWCo = 10%(Sales1) 23 Equipment purchases in Time 0 should be a negative 10,000 Cash Flow due to change in NOW in time should eaual a negative $2.400 Build a Model 24 19 F G H -1 = -0 a. Develop a spreadsheet model, and use it to find the project's NPV, IRR, and payback. -2 Input Data (in thousands of dollars) 3 Equipment cost $10,000 Key Results: 4 Net operating working capital/Sales 10% NPV = 5 First year sales (in units) 1,000 IRR 6 Sales price per unit $24.00 Payback = 7 Variable cost per unit (excl. depr.) $17.50 8 Nonvariable costs (excl. depr.) $1,000 9 Market value of equipment at Year 4 $500 0 Tax rate 40% 1 WACC 10% 2 Inflation in prices and costs 3.0% 3 Estimated salvage value at year 4 $500 4 5 Intermediate Calculations 0 1 6 Units sold 7 Sales price per unit (excl. depr.) Variable costs per unit (excl. depr.) Nonvariable costs (excl. depr.) Sales revenue 4 Required level of net operating working capital Basis for depreciation $10,000 3 Annual equipment depr. rate 20.00% 32.00% Annual depreciation expense Build a Model N 2 3 4 19.20% 11.52% wady E E F G H $10,000 $500 Years 2 0 3 4 54 Annual depreciation expense 55 Ending Bk Val: Cost - Accum Dep'm 56 Salvage value 57 Profit (or loss) on salvage 58 Tax on profit (or loss) 59 Net cash flow due to salvage 60 61 Cash Flow Forecast 62 Sales revenue 63 Variable costs 64 Nonvariable operating costs 65 Depreciation (equipment) 66 Oper, income before taxes (EBIT) 67 Taxes on operating income (40%) 68 Net operating profit after taxes 69 Add back depreciation 70 Equipment purchases 71 Cash flow due to change in NOWO 72 Net cash flow due to salvage 73 Net Cash Flow (Time line of cash flows) 74 75 Key Results: Appraisal of the Proposed Project 76 77 Net Present Value (at 10%) = 78 IRR = 79 MIRR = Build a Model 78 IRR = 79 MIRR = 80 Payback = 81 Discounted Payback = For Help in using nesting IF/THEN Statements in "Part of year required for payback and discounted payback", 82 please watch this 4 min, 44 sec. video called, "Excel: Advanced Formulas and Functions Create and Expand 83 the use of nested IF Statements; Dennis Taylor https://www.linkedin.com/learning- login/share?forceAccount=false&redirect=https%3A%2F%2Fwww.linkedin.com%2Flearning%2Fexcel-advanced-formulas-and- 84 functions%3Ftrk%3Dshare_ent_url%26shareld%3D7a364603-a226-4fa5-8254-065c8b0791eb&account=26106634 85 Data for Payback Years Years 86 1 3 87 Net cash flow 88 Cumulative CF 89 Part of year required for payback 90 91 92 Data for Discounted Payback Years Years 93 2 94 Net cash flow Discounted cash flow 96 Cumulative CF 97 Part of year required for discounted payback 98 2 4 0 1 3 4 95 99 Build a Model