Student instructions: Use the forecasting variables on the previous tab to complete the discounted free cash flow forecast and valuation shown below. Enter formulas in the blanks where indicated to complete the calculations needed. These initial incremental cash flows would require an initial $5,000,000 equipment investment and increase of $500,000 in Net Operating Working Capital. Salvage Value in the end would be $1,000,000 (don't forget to add this in the end and make tax adjustments). Discount rate is WACC in previous worksheet, but reinvestment rate is 10%. Find NPV, IRR, MIRR, and Discounted Payback.

The Discounted Free Cash Flow Model for Total Equity Initial capital investment = $5,000,000 and ANOWC = $500,000 Barking Dog Corporation Years Ending December 31 First Year Forecast 2021 2022 2023 Initial year outlay Capital Expenditure ($5,000,000) ANOWC ($500,000) 2024 10% Growth in Revenues per year $14,500,000 Total revenue Cost of Goods Sold 70% of revenues Gross profit 2,900,000 Selling, general and administrative expenses constant each year Earnings before interest, taxes, depr. & amort. (EBITDA) 5,000,000 Depreciation and amortization 100% bonus first year 0 all others Earnings before Interest and taxes (EBIT) Federal and State Income Taxes on new capital (25%) EBIT*(1-T) = Net Operating Profit After-Tax (NOPAT) **FCF2021 Year of Purchase 1,250,000 (3,750,000) (4,250,000) 1,000,000 Equipment Salvage Value in 2024, column E Capital Gain/Loss in column E Tax Rate 25% in column E Net salvage value, 2024 in column E Add back depreciation and amortization Add back ANOWC **FCF2024 PV of Discounted Free Cash Flow Cumulative Discounted Free Cash Flow NPV IRR MIRR @ Reinvestment Rate of 10% Discounted FCF Payback **FCF = EBIT *(1-T) + Dep - (CapExpenditure + ANOWC) The Discounted Free Cash Flow Model for Total Equity Initial capital investment = $5,000,000 and ANOWC = $500,000 Barking Dog Corporation Years Ending December 31 First Year Forecast 2021 2022 2023 Initial year outlay Capital Expenditure ($5,000,000) ANOWC ($500,000) 2024 10% Growth in Revenues per year $14,500,000 Total revenue Cost of Goods Sold 70% of revenues Gross profit 2,900,000 Selling, general and administrative expenses constant each year Earnings before interest, taxes, depr. & amort. (EBITDA) 5,000,000 Depreciation and amortization 100% bonus first year 0 all others Earnings before Interest and taxes (EBIT) Federal and State Income Taxes on new capital (25%) EBIT*(1-T) = Net Operating Profit After-Tax (NOPAT) **FCF2021 Year of Purchase 1,250,000 (3,750,000) (4,250,000) 1,000,000 Equipment Salvage Value in 2024, column E Capital Gain/Loss in column E Tax Rate 25% in column E Net salvage value, 2024 in column E Add back depreciation and amortization Add back ANOWC **FCF2024 PV of Discounted Free Cash Flow Cumulative Discounted Free Cash Flow NPV IRR MIRR @ Reinvestment Rate of 10% Discounted FCF Payback **FCF = EBIT *(1-T) + Dep - (CapExpenditure + ANOWC)