PROJECT SCENARIO: Suppose you are analyzing a project with the following pro-forma parameters:
|
Initial Investment (P&E)
|
Initial Working Capital
|
Working Capital Recovery
|
|
$6.2 million
|
$785,000
|
100%
|
|
OCF 1
|
OCF 2 - 4
|
OCF 5
|
|
$1.1 million
|
$2.7 million
|
$750,000
|
|
Terminal Salvage Value
|
Flotation Cost %
|
Depreciation
|
|
$0
|
6%
|
S/L to Zero over 5 Years
|
|
Marginal Tax Rate
|
Required Return
|
Project Life
|
|
40%
|
12%
|
5
|
TASK ONE: Use the above pro-forma data to develop an intial estimate of npv. Comment in any way you feel is appropriate based upon your findings.