You open a new C-Corporation called Wild Bill's Meat Processing, Inc. A task force of engineers and marketers was hired to design a meat processing facility and make estimates for cattle production throughput. Now it is your job to perform the financial analysis and decide whether you think this is a good idea or a bad idea based on the data and analysis provided by the task force. What you have below are estimates that can be used to create a forecasts for an optimistic scenario and for a pessimistic scenario. You have also been given the probability of either scenario occurring. For full points you must tell me the optimistic NPV, pessimistic NPV, and expected NPV.

Should this project be accepted? Why or why not? (5 points)

(Write your answer here)

Your answers here

Optimistic NPV:

(25 points)

Pessimistic NPV:

(25 points)

Expected NPV:

(15 points)

HINT: Think carefully about how you deal with the effects of depreciation.

DATA AND ANALYSIS PROVIDED BY TASK FORCE:
Facility cost:	$500,000,000		Corporate Tax rate:	21%		Discount rate:	12%
Facility will be depreciated on a straightline basis over 39 years.
Daily cattle production (units)			Days per year plant will operate
High estimate:	4000		High estimate:	248
Low estimate:	3000		Low estimate:	198.4
Pre-production unit cost			Growth estimates
High estimate:	$1,450		Optimistic estimate:
Low estimate:	$1,100			Unit sales:	3.00%	for ten years
				Unit sales price:	3.00%	for ten years
Post-production unit sale price				Unit cost:	1.50%	for ten years
High estimate:	$2,300			Fixed cost:	2.00%	for ten years
Low estimate:	$2,100			Terminal cash flows:	3.00%	growth in OCF after the 10th year
Annual fixed costs			Pessimistic estimate:
High estimate:	550,000,000			Unit sales:	2.00%	for ten years
Low estimate:	500,000,000			Unit sales price:	2.00%	for ten years
				Unit cost:	1.00%	for ten years
				Fixed cost:	1.00%	for ten years
				Terminal cash flows:	0.50%	growth in OCF after the 10th year
There is a 92% chance that the most pessimistic scenario is what really happens. There is only an 8% chance that the most optimistic scenario is what really happens.