1

2
3

T0
-60000000
-40000000
-5000000

T1
72000000
55000000
15000000

1
2
3

-60000000
-40000000
-5000000

72000000
55000000
15000000

Q1
Q2
Q3

Q4
Problem 1:
Q1
8.04
Q2
118.48
Q3
108.04
Q4
113.33
347.89
SUM:
20 points

NPV
$2,608,695.65
$7,826,086.96
$8,043,478.26
$118,478,260.87
$108.04
$0.00
$5,833,333.33
$7,500,000.00
$113,333,333.33

A
B
C

C0
-5000
-700
-400

C1
2500
450
100

C2
1500
300
150

C3
2100
400
200

-1000
-1500

700
400

650
400

($100.00)
1000

Problem 2:
Q5
0.111
Q6
0.306
Q7
NO
Q8
0.077
0.494
20 points

NPV
IRR
$456.69
$327.37
($4.24)

11%
31%
5%

18%
8%

Problem 3:
Q9
Q10
Q11
Q12
Q13
Q14
Q15
Q16

Problem 3:
4776
1345
5250
5342
6687
0.564
4862
0.216
28262.78
30 points

Problem 5:
Q21
Gamma
Q22
Too High

Year

0
(12,000,000.00) $

Plant Equipment
Salvage
Depriciation Tax Shield

Price/Fridge ($'s) (A)

Cost/Fridge ($'s) (B)
Fridges Sold (C)
Revenue (=A x C)
Production Cost (=B x C)
Labor Costs (real)
Labor Costs (nominal)

$
$
$
$
$
$

4,000.00
1,200.00
2,000
8,000,000.00
2,400,000.00
1,000,000.00
1,000,000.00

Before Tax Profit

After Tax Profit

$
$

4,600,000.00 $ 4,717,400.00 $ 4,837,279.64

2,990,000.00 $ 3,066,310.00 $ 3,144,231.77

(rental loss)

$
$
$
$

Cash Flow (D)

Discount Factor (E)
Discounted Cash flow (DCF = D x E)

NPV
IRR

Model Assumptions
Inflation
Tax
Labor Growth (real)

Cost of Capital (nominal)

Rental Opportunity Cost (real)

$
$

525,000.00 $
4,120.00
1,236.00
2,000
8,240,000.00
2,472,000.00
1,020,000.00
1,050,600.00

$
$
$
$
$
$

267,800.00 $

525,000.00
4,243.60
1,273.08
2,000
8,487,200.00
2,546,160.00
1,040,400.00
1,103,760.36

275,834.00

(12,000,000.00) $ 3,323,510.00 $ 3,393,397.77

1
0.909090909
0.826446281
(12,000,000.00) $ 3,021,372.73 $ 2,804,460.96
4,861,876.35
22%

3%
35%

2%

10%
400,000

3
$
$
$
$
$
$
$
$

4
-

525,000.00 $
4,370.91
1,311.27
2,000
8,741,816.00
2,622,544.80
1,061,208.00
1,159,610.63

$
$
$
$
$
$

5
-

525,000.00 $
4,502.04
1,350.61
2,000
9,004,070.48
2,701,221.14
1,082,432.16
1,218,286.93

$
$
$
$
$
$

6
-

$
$ 3,000,000.00
525,000.00 $
525,000.00
4,637.10
1,391.13
2,000
9,274,192.59
2,782,257.78
1,104,080.80
1,279,932.25

$
$
$
$
$
$

4,776.21
1,432.86
2,000
9,552,418.37
2,865,725.51
1,126,162.42
1,344,696.82

$ 4,959,660.57 $ 5,084,562.40 $ 5,212,002.56 $ 5,341,996.04

$ 3,223,779.37 $ 3,304,965.56 $ 3,387,801.67 $ 3,472,297.42
$

284,109.02 $

292,632.29 $

301,411.26 $

310,453.60

$ 3,464,670.35 $ 3,537,333.27 $ 3,611,390.41 $ 6,686,843.83

0.751314801
0.683013455
0.620921323
0.56447393
$ 2,603,058.11 $ 2,416,046.22 $ 2,242,389.31 $ 3,774,549.01

QUESTION 9 and 10
4776.209
4776
0.0206
0.0206
1000000 1020600
0
1
1.02
1000000

1.02
1020000

0.0206
1041624
2

0.0206
1063082
3

0.0206
1084981
4

0.0206
1107332
5

0.0206
1130143
6

1.02
1040400

1.02
1061208

1.02
1082432

1.02
1104081

1.02
1126162
1344697

0.0206
1153424

1345

STOCK
A
B
RF

SD
0.30
0.12

ER
0.15
0.10
0.30

Corr. coE
0.4
0.4

0.045
0.07
0.115

Allocation
50
70
50

0.146
0.115

0.851