Land price

Current land value

Land value in 5 years
Plant & Equipment cost

$
$
$
$

Debt
Bonds outstanding

185,000

Years to Maturity
Annual coupon rate
Coupons per year
Face value
Bond price (% of par)
Common stock
Shares outstanding
Beta
Share price
Preferred stock outstanding
Shares outstanding
Coupon rate
Share price

20
5.25%
2
1,000
98%

11,200,000
1.05
74.50

350,000
4.75%
73.25

Market
Market risk premium
Risk-free rate
Equity floatation cost
Preferred floatation cost
Debt floatation cost
Tax rate
Net working capital
Does the NWC require
floatation costs (Yes/No)
Adjustment factor
Life of plant (years)
Life of project (years)
Plant salvage value
Annual fixed costs
Quantity manufactured
Sale price per unit

2,800,000
3,350,000
3,925,000
26,500,000

7.00%
3.50%

7.00%
5.00%
4.00%
35%
1,150,000
No

$
$
$

2%
7
5
3,900,000
5,700,000
9,800
10,750

Sunk
Opportunity
Future

Variable costs per unit

8,900

Market Value of Debt

Market Value of Common
Market Value of Preferred
Total Value

$
181,300,000
$
834,400,000
$
25,637,500
$ 1,041,337,500

Weight

weighted average flotation costs

Initial Cash Outflow
NWC
Opportunity Cost
Amount to be raised
Initial Cash Outflow

$
$
$
$

WACC
Risk Adjusted WACC

pv
6.4285% fv
t
r
(1,150,000) pmt
(3,350,000)
(28,320,574.36)
(32,820,574)
9.1599%
11.1599%

Depreciation per year

BV
After tax salvage

$
3,228,571
$ 10,357,142.86
$
6,160,000.00

OCF(Tax Shield Approach)

Accounting B/E

Cash Flows
0
1
2
3
4
5
NPV
IRR

9,209,500

4,826.25

$
(32,820,574)
$
9,209,500
$
9,209,500
$
9,209,500
$
9,209,500
$ 20,444,500.00
$7,699,923.67
19.06%

IF NWC needs to be financed with

outside sources
NWC

$ (1,229,006.06)

Cost
17.41%
80.13%
2.46%
100%

1.76%
10.85%
6.48%

(980)
1,000
40
2.71%
26.25

Opportunity Cost
Amount to be raised
Initial Cash Outflow
Cash Flows
0
1
2
3
4
5
NPV
IRR

$ (3,350,000.00)
$ (28,320,574.36)
$ (32,899,580.41)

$ (32,899,580.41)
$
9,209,500
$
9,209,500
$
9,209,500
$
9,209,500
$ 20,444,500.00
$

7,620,917.61
18.96%