Problem 1: Using the Hybrid tab in the HW7 template file (posted in the Class 18-19 folder in the Files section), determine the value of the project being modeled using a 3 year planning period and assuming that projects in this industry tend to sell for 5.5x EBITDA in the hybrid model. Note that the $600,000 is all CAPEX and makes up the majority of your initial investment (the rest is working capital). Assume a 3 year life for the assets you bought and use straight line depreciation. Based on your calculated NPV with a WACC of 9.5%, is this project/firm a good investment? Explain why or why not.
Problem 2: Chapter 9, problems 9.4 and 9.6. You don't have to use the template to work the problems, but I HIGHLY recommend it. Hint: fill in the yellow cells and assume that the drivers in the template are correct ... the stock price at the end of both problems should be identical to the third decimal point.