You just only answer the No.2 question. Question (1) shows the data.

(1) F-Tesla Motors is evaluating a new project based on the forecasted income statements below:

The companys tax rate is 40%. The project required an initial investment of $15,000 and an additional investment of $2,000 at the end of year two. The working capital is anticipated to be 10% of revenues, and the working capital investment has to be made at the beginning of each period.

Estimate the projects payback period, NPV and IRR to investors in the firm. Assuming the cost of capital is 12%. Recommend if the project should go ahead based on each of the methods.

(2) Consider the project described in (a). Assume that the firm plans to finance 40% of its net capital expenditure and working capital needs with debt. The interest rate is 10%. Re-estimate the payback period, NPV and IRR to equity investors if the cost of equity is 16%.

Year Revenues ($) Cost of goods sold ($) - Depreciation ($) =EBIT ($) 1 10,000 4,000 4,000 2,000 11,000 4,400 3,000 3,600 3 12,000 4,800 2,000 5,200 4 13,000 5,200 1,000 6,800