Problem: Create an Excel spreadsheet for a production plant with the following criteria:
- The company will lease for 5 years at $1,500,000 per year.
- It will cost the firm $4,000,000 in capital (straight-line depreciation, 5 year life) in year 0.
- It will cost the firm an additional $150,000 per year after the new production plant is brought online for other expenses.
- It will generate incremental revenue of $3,500,000 per year.
Use a 40% tax rate, a 10% cost of capital, and a 12% reinvestment rate. Assume the company will use cash flow to finance the project.
In a separate document, indicate how the project would fair under hurdle rate scenarios of 10%, 15%, and 20% (based on MIRR).