Questions 7 and 8 are based on the following investment opportunity:

Wonderful Snacks, Inc. is considering adding a new line of cookies and bars to its current product offer. The projects life is 7 years. The firm estimates selling 440K packages at a price of $2 per unit the first year; but this volume is expected to grow at 12% per year over the life of the project. The price per unit is expected to grow at a rate of 5% per year. Variable costs are 20% of revenue and the fixed costs will be $700K per year. The equipment required to produce the cookies and bars has an upfront cost of$1.4M. It will be depreciated using straight-line depreciation over the life of the project. After seven years, the equipment will be worthless. No additional net working capital is required for this project. The projects discount rate is 15% and the firms marginal tax rate is 20%.

1. (15 points) In the FE #7-8 worksheet, build a model to calculate the projects free cash flows (FCF) and net present value. Create driver cells that allow the user to vary the following inputs: volume growth rate, price per unit growth rate, and discount rate. Below are calculations you may find useful in setting up your model:

FCF = EBIT x (1 - tax rate) + Depreciation - Capital Expenditures - DNWC + Terminal CF

EBIT = (Price x Units) - Variable Costs - Fixed Costs - Depreciation

Terminal Cash Flow = Salvage Value - Tax Rate x (Salvage Value - Book Value)

1. (12 points) Wonderful Snacks has requested the following two sensitivity analyses of the proposed projects:
   1. Create a one-way data table to calculate the net present value of the project at discount rates ranging between 5% and 25%. Use increments of 1%.

1. Create a two-way data table that calculates the net present value of the project at volume growth rates of 6%, 9%, 12% and 15% and price per unit growth rates of 4%, 5%, and 6%.