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Initial Outlay $50,000,000

Additional Outlay $25,000,000

Fixed Cost $2,000,000

Variable Cost Rate (% of sales) 60.00%

Net working capital rate (% of sales) 8.00%

Tax Rate 40.00%

Required Return 11.00%Cash Flow growth rate after 5 years 4.00%

Opportunity Cost $0

20 Year MACRS Depreciation 0.0375 0.07219 0.06677

Time 0 Year 1 Year 2 Year 3

Initial Outlays (50,000,000)$ (25,000,000)$

Opportunity Cost $0

Sales - 15,000,000 27,000,000

Operating costs (1,000,000) (11,000,000) (18,200,000)

Fixed cost (1,000,000) (2,000,000) (2,000,000)

Variable cost - (9,000,000) (16,200,000)

Depreciation (1,875,000) (4,547,000) (5,143,250)

Depreciation Initial Outlay (1,875,000) (3,609,500) (3,338,500)

Depreciation Second Outlay (937,500) (1,804,750)

Taxable Income - (2,875,000) (547,000) 3,656,750

Taxes - 1,150,000 218,800 (1,462,700)

Net Income - (1,725,000) (328,200) 2,194,050

Depreciation - 1,875,000 4,547,000 5,143,250

Operating Cash Flows 150,000 4,218,800 7,337,300

Capital Expenditures (50,000,000)$ (25,000,000)$ $0 $0Change in Net Working Captital (1,200,000) (960,000) (640,000)

Net Working Capital - 1,200,000 2,160,000 2,800,000

Project Cash Flow (50,000,000) (26,050,000) 3,258,800 6,697,300

Horizon Value

Free Cash Flow (50,000,000) (26,050,000) 3,258,800 6,697,300

NPV $33,913,704

IRR 20.88%

PI 1.68

$33,913,704 1.0% 1.5% 2.0%

5% 146,773,534 176,156,647 215,334,131

6% 99,265,186 116,867,796 138,871,058

Consider the effect on NPV by

changing the growth rate and

required return rate

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7% 67,760,129 79,319,494 93,190,733

8% 45,394,511 53,472,005 62,895,747

9% 28,736,632 34,640,353 41,387,462

10% 15,880,181 20,344,455 25,366,763

11% 5,681,530 9,148,639 13,000,983

required 12% (2,586,946) 164,297 3,190,664

return 13% (9,410,213) (7,187,977) (4,763,719)14% (15,123,913) (13,302,073) (11,328,412)

15% (19,967,701) (18,455,081) (16,826,105)

16% (24,117,245) (22,847,572) (21,487,208)

17% (27,704,224) (26,628,285) (25,480,616)

18% (30,829,274) (29,909,836) (28,932,934)

19% (33,570,608) (32,779,047) (31,940,923)

20% (35,989,926) (35,303,912) (34,579,787)

Probability Adjusted NPV Term Growth Rate Rate of Return Probability

99 4.00% 11.00% 75.00%

15 4.00% 14.00% 25.00%

Probability

Adjusted

NPV

Model assumptions No salvage value assumed, the discount rate should

Growth rate of cashflow remains constant after year 5

Project will last atleast for 5 years

Time 0 Year 1 Year 2 Year 3

Project Cash Flow -50000000.00 -26050000.00 3258800.00 6697300.00

20Age of the project (in whole years, greater than 5)

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19.00%

7.00%

NPV -27304634.83

Sensitivity Analysis NPV vs. Growth Rate

From ToAge range (Max 100 years) 10 40

Age

Growth Rate

Discount rate

Growth rate

Clear

Sensitivity

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0.06177 0.05713 0.05285

Year 4 Year 5 Year 6

35,000,000 40,000,000 42,000,000

(23,000,000) (26,000,000)

(2,000,000) (2,000,000)

(21,000,000) (24,000,000)

(4,757,750) (4,400,750)

(3,088,500) (2,856,500)

(1,669,250) (1,544,250)

7,242,250 9,599,250

(2,896,900) (3,839,700)

4,345,350 5,759,550

4,757,750 4,400,750

9,103,100 10,160,300

$0 $0(400,000) (160,000)

3,200,000 3,360,000

8,703,100 10,000,300

148,575,886

8,703,100 158,576,186

growth rate

2.5% 3.0% 3.5% 4.0% 4.5%

270,182,608 352,455,323 489,576,516 763,818,901 1,586,546,057

167,160,966 204,880,843 257,688,672 336,900,414 468,919,985

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110,144,468 131,336,638 158,583,713 194,913,146 245,774,352

74,032,897 87,397,477 103,731,964 124,150,072 150,401,926

49,172,588 58,255,235 68,989,272 81,870,117 97,613,372

31,058,713 37,563,798 45,069,665 53,826,511 64,175,510

17,306,543 22,150,298 27,639,888 33,913,704 41,152,723

6,535,597 10,252,188 14,406,026 19,079,093 24,375,236

(2,108,580) 812,073 4,040,163 7,626,930 11,635,669(9,183,130) (6,842,821) (4,279,626) (1,460,112) 1,656,194

(15,066,812) (13,160,911) (11,089,279) (8,829,317) (6,354,120)

(20,026,077) (18,452,551) (16,753,143) (14,912,117) (12,911,002)

(24,253,797) (22,939,349) (21,527,534) (20,007,118) (18,365,068)

(27,893,006) (26,783,749) (25,597,992) (24,327,538) (22,962,977)

(31,052,003) (30,107,527) (29,102,116) (28,029,678) (26,883,279)

(33,814,283) (33,003,749) (32,144,092) (31,230,707) (30,258,393)

NPV

33,913,704

(1,460,112)

25,070,250

Year 4 Year 5 Year 6 Year 7 Year 8

8703100.00 10000300.00 10700321.00 11449343.47 12250797.51

-27304634.83

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54131196.21

55692302.07

57295239.37

58940944.52

60630368.7

62364477.97

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5.0% 5.5% 6.0% 6.5% 7.0% 7.5%

#DIV/0! (1,704,362,566) (881,635,411) (607,393,025) (470,271,833) (387,999,117)

732,959,127 1,525,076,553 #DIV/0! (1,643,393,151) (851,275,725) (587,236,583)

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322,066,162 449,219,179 703,525,212 1,466,443,311 #DIV/0! (1,585,229,085)

185,404,398 234,407,858 307,913,048 430,421,699 675,439,000 1,410,490,904

117,292,440 142,594,099 176,329,645 223,559,410 294,404,056 412,478,467

76,594,309 91,772,841 110,746,006 135,140,076 167,665,502 213,201,098

49,598,246 59,579,317 71,556,604 86,195,509 104,494,140 128,020,952

30,427,971 37,411,895 45,559,807 55,189,158 66,744,379 80,867,427

16,145,501 21,256,644 27,097,950 33,837,918 41,701,215 50,994,2015,118,755 8,988,677 13,342,339 18,276,489 23,915,518 30,422,090

(3,631,404) (622,086) 2,721,600 6,458,662 10,662,856 15,427,609

(10,727,968) (8,337,026) (5,706,989) (2,800,107) 429,763 4,039,617

(16,586,182) (14,652,609) (12,543,257) (10,233,014) (7,691,747) (4,882,979)

(21,493,448) (19,906,358) (18,187,010) (16,318,154) (14,279,402) (12,046,482)

(25,654,994) (24,335,724) (22,914,973) (21,380,562) (19,718,283) (17,911,458)

(29,221,258) (28,112,597) (26,924,746) (25,648,906) (24,274,924) (22,791,024)

Year 9 Year 10 Year 11 Year 12 Year 13 Year 14

13108353.34 14025938.07 15007753.74 16058296.50 17182377.25 18385143.66

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NPV at return rate=14%

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Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23

######## ######## ######## ######## ######## ######## 0.00 0.00 0.00

(20,000,000)

(10,000,000)

-

10,000,000

20,000,000

30,000,000

40,000,000

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%

NPV

Cash Flow Growth Rate (after year 5)

Break Even=4.24%

(10,000,000)

(8,000,000)

(6,000,000)

(4,000,000)

(2,000,000)

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

10% 11% 12% 13% 14% 15% 16% 17%NPV

Required Return Rate

NPV at growth rate=4%

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Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 Year 31 Year 32

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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Year 33 Year 34 Year 35 Year 36 Year 37 Year 38 Year 39 Year 40 Year 41

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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Year 42 Year 43 Year 44 Year 45 Year 46 Year 47 Year 48 Year 49 Year 50

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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Year 51 Year 52 Year 53 Year 54 Year 55 Year 56 Year 57 Year 58 Year 59

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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Year 60 Year 61 Year 62 Year 63 Year 64 Year 65 Year 66 Year 67 Year 68

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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Year 69 Year 70 Year 71 Year 72 Year 73 Year 74 Year 75 Year 76 Year 77

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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Year 78 Year 79 Year 80 Year 81 Year 82 Year 83 Year 84 Year 85 Year 86

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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Year 87 Year 88 Year 89 Year 90 Year 91 Year 92 Year 93 Year 94 Year 95

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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Year 96 Year 97 Year 98 Year 99 Year 100

0.00 0.00 0.00 0.00 0.00

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Year 20 Years

1 0.0375

2 0.07219

3 0.06677

4 0.06177

5 0.05713

6 0.052857 0.04888

8 0.04522

9 0.04462

10 0.04461

11 0.04462

12 0.04461

13 0.04462

14 0.04461

15 0.04462

16 0.04461

17 0.04462

18 0.04461

19 0.04462

20 0.02231