Reference no: EM133119722
Company ABC is looking at doing the below project. Which is expected to have the below first-year financials, Net working capital is paid at time zero.
Revenue: $58 million
EBITDA: $14 million
Depreciation & Amortization: $2.5 million
CapEx: $2 million
Tax Rate: 30%
Net Working Capital: $7 million
It is expected that over 10 years the EBITDA margin will increase by 0.4% a year while depreciation, CapEx, and Networking capital will remain a constant % of sales. Revenue will grow by 3% a year.
After 10 years of business, the project will be finished and Net Working Capital returned.
If your required rate of return is 11% at what initial cost would you accept the project?
Provide a spreadsheet to support your calculations and provide a short explanation of your decision and findings in the same spreadsheet, 4-6 sentences should be sufficient. Ensure the spreadsheet allows me to adjust growth, Ebitda margin, and required rate of return assumptions to see the updated NPV and IRR.