You are a financial analyst for a major consumer products company. They are considering the product launch of a new cereal with the following expenditures: $10 million ($5 million upfront, S5 million at end of 1st year). Plant will take 1 year to construct. $3mm salvage value at end of 10 years New Plant Cost: Feasibility studies: $50,000 upfront (will be expended regardless of whether the project goes forward or not). Straight line over 5 years to zero, beginning at end of 1st year 1 million units (sales begin at end of 1st year and grow at 5% pa Depreciation Unit Sales thereafter) Price per Unit: COGS: Fixed costs: Working capital: $5.75 per unit, growing at 2% inflation per year 60% of Sales $150,000 per annum $300,000 incurred at end of first year and recouped at end of 10 years Cost of Capital: 11% Marginal Tax Rate: 25% 1. Forecast the project's after-tax cashflows for 10 years using excel 2. What is the NPV? 3. What is the IRR? 4. Which single variable (holding the others constant) has the greatest impact on the NPV? (change each of the discount rate, price per unit, COGS, inflation rate, and tax rate by 1% holding the other variables constant). 5. Create a 2-variable data table (columns and rows) showing NPV at 10%, 11%, and 12% cost of capital and 20%, 25%, and 30% tax rates. 6. Is this project is worth pursuing? Why or why not?

Select the correct answer. joshua runs a large manufacturing business that is listed on the stock exchange. his company made good profits in the previous financial year. he now plans to reward his shareholders with handsome dividends. under which category of activities in the cash flow statement would the company’s accountants place this outflow of cash? a. investing activities b. operating activities c. financing activities d. non-operating activities

Selected data for stick’s design are given as of december 31, year 1 and year 2 (rounded to the nearest hundredth). year 2 year 1 net credit sales $25,000 $30,000 cost of goods sold 16,000 18,000 net income 2,000 2,800 cash 5,000 900 accounts receivable 3,000 2,000 inventory 2,000 3,600 current liabilities 6,000 5,000 compute the following: 1. current ratio for year 2 2. acid-test ratio for year 2 3. accounts receivable turnover for year 2 4. average collection period for year 2 5. inventory turnover for year 2

Calculate the cost of each capital component—in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). use both the capm method and the dividend growth approach to find the cost of equity. calculate the cost of new stock using the dividend growth approach. what is the cost of new common stock based on the capm? (hint: find the difference between re and rs as determined by the dividend growth approach and then add that difference to the capm value for rs.)assuming that gao will not issue new equity and will continue to use the same target capital structure, what is the company’s wacc? e. suppose gao is evaluating three projects with the following characteristics. each project has a cost of $1 million. they will all be financed using the target mix of long-term debt, preferred stock, and common equity. the cost of the common equity for each project should be based on the beta estimated for the project. all equity will come from reinvested earnings. equity invested in project a would have a beta of 0.5 and an expected return of 9.0%.equity invested in project b would have a beta of 1.0 and an expected return of 10.0%.equity invested in project c would have a beta of 2.0 and an expected return of 11.0%.analyze the company’s situation, and explain why each project should be accepted or rejected g