What is the NPV of this project?

It requires an initial investment of $5,000 Revenues will be $2,000 in year one, growing by $5,000 annual Operating expenses will be $1,000 in year one, growing by 25% Depreciation will be $1,000 in year 1 doubling each year Capital investment required to maintain the facility will be $8,0 The company expects to sell $1,000 less than it collects in years The company's stock is consistently 15% less risky than the mar The overall stock market is expected to grow at 15% annually The short end of the yield curve is currently at 5% The company's bonds current have a YTM of 7% The company is in the 30% tax bracket The company finances itself with 3 times as much equity as deb

$5,000 annually through year 5 rowing by 25% annually through year 5 ach year ty will be $8,000 in years 3, 4 and 5 ollects in years 2 to 5 ky than the market 15% annually

h equity as debt

What is the NPV of this project? It requires an initial investment of $5,000 Revenues will be $2,000 in year one, growing by $5,000 annually through year 5 Operating expenses will be $1,000 in year one, growing by 25% annually through year 5 Depreciation will be $1,000 in year 1 doubling each year Capital investment required to maintain the facility will be $8,000 in years 3, 4 and 5 The company expects to sell $1,000 less than it collects in years 2 to 5 The company's stock is consistently 15% less risky than the market The overall stock market is expected to grow at 15% annually The short end of the yield curve is currently at 5% The company's bonds current have a YTM of 7% The company is in the 30% tax bracket The company finances itself with 3 times as much equity as debt 0 Revenues OPEX Op Inc. Depreciation Taxable Income Tax After-tax Income Depreciation NOPAT CAPEX WC FCF PV = NPV = Cost of Equity = Cost of Debt = WACC = $ $ $ $ $ $ $ $ $ $ (5,000) $ (5,000) $ $ (5,000) $ $ 12,098 13.5% 4.9% 11.4% 1,000 898 $ $ $ 1,000 5,625 4,537 1 2,000 1,000 1,000 1,000 1,000 1,000 2 7,000 1,250 5,750 2,000 3,750 1,125 2,625 2,000 4,625 3 12,000 1,563 10,438 4,000 6,438 1,931 4,506 4,000 8,506 (8,000) 1,000 1,506 1,091 4 17,000 1,953 15,047 8,000 7,047 2,114 4,933 8,000 12,933 (8,000) 1,000 5,933 3,859

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $ $ $ $ $

ough year 5

$ $ $ $ $ $ $ $ $ $ $ $ $

5 22,000 2,441 19,559 16,000 3,559 1,068 2,491 16,000 18,491 (8,000) 1,000 11,491 6,713

What is the NPV of this project? It requires an initial investment of $10,000 Revenues will be $0 in year one, growing to $1,000 in year 2 and $3,00 Operating expenses will be $100 in year 2, growing by 15% annually t Depreciation will be $1,000 in years 3, 4 and 5 Capital investment required to maintain the facility will be $1,000 ever At the end of year 5, the company will sell the facility for exactly $2,0 The company builds $750 of additional inventory every year The company's stock has consistently delivered twice the market's retu The market currently quotes the company's bonds at YTM of 1% over The company is in the 40% tax bracket The company finances itself with 4 times as much debt as equity The stock market has grown by 12% per year Treasuries yield 5%

year 2 and $3,000 in years 3 to 5 y 15% annually through year 5

ll be $1,000 every year for exactly $2,000

the market's return TM of 1% over treasury bonds

t as equity

What is the NPV of this project? It requires an initial investment of $10,000 Revenues will be $0 in year one, growing to $1,000 in year 2 and $3,000 in years 3 to 5 Operating expenses will be $100 in year 2, growing by 15% annually through year 5 Depreciation will be $1,000 in years 3, 4 and 5 Capital investment required to maintain the facility will be $1,000 every year At the end of year 5, the company will sell the facility for exactly $2,000 The company builds $750 of additional inventory every year The company's stock has consistently delivered twice the market's return The market currently quotes the company's bonds at YTM of 1% over treasury bonds The company is in the 40% tax bracket The company finances itself with 4 times as much debt as equity The stock market has grown by 12% per year Treasuries yield 5% 0 Revenues OPEX Op Inc. Depreciation Taxable Income Tax After-tax Income Depreciation NOPAT CAPEX WC FCF PV = NPV = Cost of Equity = Cost of Debt = WACC = $ 1 $ $ $ $ $ $ $ $ $ $ $ 2 1,000 $ 100 $ 900 $ $ 900 $ 360 $ 540 $ $ 540 $ (1,000) $ (750) $ (1,210) $ (1,063) $ 3 3,000 115 2,885 1,000 1,885 754 1,131 1,000 2,131 (1,000) (750) 381 314

$ $ $ $ $ $ (10,000) $ $ $ (10,000) $ $ (10,000) $ $ (10,397) 19.0% 3.6% 6.7%

(1,000) (750) (1,750)

(1,640) $

00 in years 3 to 5 hrough year 5

treasury bonds

$ $ $ $ $ $ $ $ $ $ $ $ $

4 3,000 132 2,868 1,000 1,868 747 1,121 1,000 2,121 (1,000) (750) 371 286

$ $ $ $ $ $ $ $ $ $ $ $ $

5 3,000 152 2,848 1,000 1,848 739 1,109 1,000 2,109 1,000 (750) 2,359 1,707

What is the NPV of this project? It requires an initial investment of $100,000 Revenues will be $50,000 in year one, growing by 35% through year 5 Operating expenses will always be 60% of revenues Depreciation will always be 10% of revenues Capital expenditures will be $50,000, growing at the same rate as reven The company adds an additional 1% of each year's revenues to Accoun The company's stock has consistently delivered 150% of the market's r The market currently quotes the company's bonds at 2% over treasury The company is in the 40% tax bracket The company finances itself with twice as much debt as equity The stock market has grown by 20% per year Treasuries yield 5% After year 5, FCF grows at 5% forever

% through year 5.

ame rate as revenues for that year enues to Accounts Receivable of the market's return % over treasury bonds

as equity

What is the NPV of this project? It requires an initial investment of $100,000 Revenues will be $50,000 in year one, growing by 35% through year 5 Operating expenses will always be 60% of revenues Depreciation will always be 10% of revenues Capital expenditures will be $5,000 in year 1, growing at the same rate The company adds an additional 1% of each year's revenues to Accoun The company's stock has consistently delivered 150% of the market's r The market currently quotes the company's bonds at 2% over treasury The company is in the 40% tax bracket The company finances itself with twice as much debt as equity The stock market has grown by 20% per year Treasuries yield 5% After year 5, FCF grows at 5% forever
0 Revenues OPEX Op Inc. Depreciation Taxable Income Tax After-tax Income Depreciation NOPAT CAPEX WC FCF $ $ $ $ $ $ $ $ $ $ (100,000) $ $ $ (100,000) $ 1 50,000 30,000 20,000 5,000 15,000 6,000 9,000 5,000 14,000 $ $ $ $ $ $ $ $ $ 2 67,500 40,500 27,000 6,750 20,250 8,100 12,150 6,750 18,900 $ $ $ $ $ $ $ $ $ 3 91,125 54,675 36,450 9,113 27,338 10,935 16,403 9,113 25,515 (9,113) (911) 15,491

(5,000) $ (500) $ 8,500 $

(6,750) $ (675) $ 11,475 $

PV =

$ (100,000) $

8,500

11,475

15,491

NPV =

226,422

Cost of Equity = Cost of Debt = WACC =

27.5% 4.2% 12.0%

by 35% through year 5.

rowing at the same rate as revenues each year ar's revenues to Accounts Receivable 150% of the market's return ds at 2% over treasury bonds

h debt as equity

4 $ $ $ $ $ $ $ $ $ $ $ $ 123,019 73,811 49,208 12,302 36,906 14,762 22,143 12,302 34,445 $ $ $ $ $ $ $ $ $

5 Terminal 166,075 99,645 66,430 16,608 49,823 19,929 29,894 16,608 46,501 (16,608) (1,661) 28,233 $ 29,644

(12,302) $ (1,230) $ 20,913 $

20,913

28,233

241,810

What is the NPV of this project? It requires an initial investment of $15,000 Revenues will be $25,000 in years 3 to 6 Operating expenses will be $10,000 every year Depreciation will be $5,000 growing by 10% every year Capital expenditures will be $2,000 every year that there are revenues The company adds an additional $5,000 every year to Accounts Payab The company's stock has consistently been half as risky as the market The market currently quotes the company's bonds at double the yield o The company is in the 20% tax bracket The company finances itself with twice as much equity as debt The stock market has grown by 10% per year Treasuries yield 5% FCF grows by 2% forever

ere are revenues Accounts Payable y as the market ouble the yield of treasury bonds

y as debt

What is the NPV of this project? It requires an initial investment of $15,000 Revenues will be $25,000 in years 3 to 6 Operating expenses will be $10,000 every year Depreciation will be $5,000 in year 1 growing by 10% Capital expenditures will be $2,000 every year that there are revenues The company adds an additional $5,000 every year to Accounts Payab The company's stock has consistently been half as risky as the market The market currently quotes the company's bonds at double the yield o The company is in the 20% tax bracket The company finances itself with twice as much equity as debt The stock market has grown by 10% per year Treasuries yield 5% FCF grows by 2% forever

0 Revenues OPEX Op Inc. Depreciation Taxable Income Tax After-tax Income Depreciation NOPAT CAPEX WC FCF $ (15,000) $ $ (15,000) $ $ $ -

1 $ $ -

2 $ $

3 25,000 10,000 15,000 6,050 8,950 1,790 7,160 6,050 13,210 $ $ $ $ $ $ $ $ $

4 25,000 10,000 15,000 6,655 8,345 1,669 6,676 6,655 13,331 (2,000) 5,000 16,331

10,000

10,000

$ (10,000) $ (10,000) $ $ 5,000 $ 5,500 $

$ (15,000) $ (15,500) $ $ (3,000) $ (3,100) $

$ (12,000) $ (12,400) $ $ $ 5,000 $ 5,500 $

(7,000) $ $ 5,000 $

(6,900) $ 5,000 $ $

(2,000) $ 5,000 16,210 $ $

(2,000) $

(1,900) $

PV = NPV =

$ (15,000) $ $ 220,629

(1,858) $

(1,639) $

12,988

12,153

Cost of Equity = Cost of Debt = WACC =

7.5% 8.0% 7.7%

at there are revenues ar to Accounts Payable s risky as the market at double the yield of treasury bonds

quity as debt

5 $ $ $ $ $ $ $ $ $ $ $ $ 25,000 10,000 15,000 7,321 7,680 1,536 6,144 7,321 13,464 $ $ $ $ $ $ $ $ $

6 Terminal 25,000 10,000 15,000 8,053 6,947 1,389 5,558 8,053 13,611 (2,000) 5,000 16,611 $ 16,943

(2,000) $ 5,000 16,464 $ $

11,380

10,663

$ 191,941.05

What is the NPV of this project? It requires an initial investment of $5,000 Revenues will be $10,000 growing by 25% through year 6 Operating expenses will be 60% of revenues Depreciation will be $5,000 in year 1 growing by 10% Capital expenditures will be $1,000 and the company will sell all equip The company adds an additional $500 every year to Inventory The company's stock has consistently tracked the market The market currently quotes the company's bonds at three times the yie The company is in the 20% tax bracket The company finances itself with five times as much debt as equity The stock market has grown by 25% per year Treasuries yield 5%

gh year 6

any will sell all equipment for $5,000 on the last day of year 6 to Inventory at three times the yield of treasury bonds

uch debt as equity

What is the NPV of this project? It requires an initial investment of $5,000 Revenues will be $10,000 growing by 25% through year 6 Operating expenses will be 60% of revenues Depreciation will be $5,000 in year 1 growing by 10% Capital expenditures will be $1,000 every year and the company will s The company adds an additional $500 every year to Inventory The company's stock has consistently tracked the market The market currently quotes the company's bonds at three times the yie The company is in the 20% tax bracket The company finances itself with five times as much debt as equity The stock market has grown by 25% per year Treasuries yield 5%

0 Revenues OPEX Op Inc. Depreciation Taxable Income Tax After-tax Income Depreciation NOPAT CAPEX WC FCF $ $ $ $ $ $ $ $ $ $ $ (5,000) $ $ (5,000) $

1 10,000 6,000 4,000 5,000 $ $ $ $

2 12,500 7,500 5,000 5,500 $ $ $ $

3 15,625 9,375 6,250 6,050 200 40 160 6,050 6,210 $ $ $ $ $ $ $ $ $

4 19,531 11,719 7,813 6,655 1,158 232 926 6,655 7,581 (1,000) (500) 6,081

(1,000) $ (200) $ (800) $ 5,000 4,200 $ $

(500) $ (100) $ (400) $ 5,500 5,100 $ $

(1,000) $ (500) $ 2,700 $

(1,000) $ (500) $ 3,600 $

(1,000) $ (500) $ 4,710 $

PV =

(5,000) $

2,400

2,844

3,308

3,796

NPV =

19,002

Cost of Equity = Cost of Debt = WACC =

15.0% 12.0% 12.5%

gh year 6

d the company will sell all equipment for $5,000 on the last day of year 6 to Inventory at three times the yield of treasury bonds

uch debt as equity

5 $ $ $ $ $ $ $ $ $ $ $ $ 24,414 14,648 9,766 7,321 2,445 489 1,956 7,321 9,277 $ $ $ $ $ $ $ $ $

6 30,518 18,311 12,207 8,053 4,154 831 3,324 8,053 11,376 4,000 (500) 14,876

(1,000) $ (500) $ 7,777 $

4,315

7,338