Papa Bear Company, show all work in excel.

• A project requires an initial investment of $400,000 and is expected to produce additional sales revenue of $250,000 per year, which thereafter should grow at the rate of inflation. Costs of goods sold are estimated at 61% of sales. It is expected that cashflows will carry on for 6 years. In year 7 the project will wind down, and revenue will be half of the year 6 amount.
• The project will require additional working capital of 10% of sales. As working capital ramps up, charge ½ of the year 1 value (5% of sales) in Year 0 and then apply the additional amount required each year. Simply apply the same growth rate as a use of cash. At the end of the project life, assume all the working capital is recovered in year 7.
• Papa Bear’s public debt trades at 8% and they estimate their cost of equity at 14%, the debt/equity composition is 40/60
• Papa Bear expects no salvage value
• Expect inflation to be 2%

Scenario One: Under the old tax law, pre-2018, corporate income taxes were 35% and assets could be depreciated on a modified accelerated cost recovery system (MACRS) schedule which permitted depreciation of 20%, 32%, 20%, 16%, and 12% of the asset purchase cost in years 1-5 respectively.

Fill (only) these cells with yellow paint NPV (1 pt), and IRR (1 pt); no partial credit. (Total is 2pts)

Scenario Two: Under the 2018 tax law, Papa Bear pays corporate taxes at a rate of 21% and – again under this new tax law – accelerated depreciation allows the depreciation of the entire initial investment for tax purposes in the first year.

Fill (only) these cells with yellow paint: Cost of Capital (1 pt), NPV (1 pt), IRR (1 pt), no partial credit. (Total is 3 pts)

What was the impact of the new tax changes on the cost of capital, and the attractiveness of corporate investments? (one sentence, highlighted in yellow)

I’m working on a Finance exercise and need support.

Prior to working on this discussion, watch these videos:

• American Call Options (Links to an external site.)
• American Put Options (Links to an external site.)
• Forward Contract Introduction (Links to an external site.)

Generate two multiple choice questions that you think could appear about these topics on an assignment that is similar in nature to the CFA. Post your questions to the discussion board.

Q1. NTL Company is issuing eight-year bonds with a coupon rate of 6.5 percent and semiannual coupon payments. If the current market rate for similar bonds is 8 percent, what will be the bond price? If the company wants to raise $1.25 million, how many bonds does the firm have to sell? 1 mark

Q2. Suppose a 3-year bond with a 6% coupon rate that was purchased for $760 and had a promised yield of 8%. Suppose that interest rates increased, and the price of the bond declined. Displeased, you sold the bond for 798.8 after having owned it for 1 year. What is the realized yield? 1 mark

Q3. Ahmed is interested in purchasing the common stock of Inch, Inc., which is currently priced at $ 40. The company is expected to pay a dividend of $3 next year and to grow at a constant rate of 8 percent. 1 mark

a. What should the market value of the stock be if the required rate of return is 15.75 percent?

b. Is this a good buy? Why or why not?

Q4. Briefly compare the NPV, PI, and IRR criteria. What are the advantages and disadvantages of using each of these methods? 2 marks

calculate the PV of NCF for “Scenario: No Real Options”, which stands for Present Value of Net Cash Flow. And i need the same thing done for “Scenario: Real options.” I also need to know the formula that is used to conduct the final solution. From my understanding, you are supposed to use the Black-Scholes Option Pricing formula.

For reference, here is what the problem set says:

A. JTM Airlines is looking at buying more gates at their home airport. JTM’s discount rate is 5.5% and the risk free rate is 2.0%. What is the NPV of the gate purchases if it boughtthem today? Use the data in the Excel template provided.

B. After you run the numbers for part A, you remember back to the concept of realoptions, which means that JTM can make investment decisions as time passes:

1. Present valuing the purchase price of the gates (that is, the years 1 and 2 Capital Expenditures) separately using the risk-free rate. Once JTM decides to go ahead with the purchase, there is no risk to that expenditure.

2. Present valuing the Net Cash Flow excluding those purchase prices. Thiscalculation will include Cap. Ex. for years 3-15 as they are part of the normaloperation of the gates and are unrelated to the purchase price.

3. Use the Black-Scholes Option Pricing formula to come up with option’s priceassuming a 2-year maturity and a 15% price volatility for gate prices.

4. Compare the price of the call option with the NPV in the No Real Optionsscenario. Is the option worth it?