Joe is thinking about expanding his business. Business plan as follows:
Initial investment of $2 million for PP&E, depreciated straight line over 10 years 5 year life
Revenue of $1.2 million in the first year, grows at 5%/year
Expenses = 55% of revenue (does not include depreciation)
NWC for each year must be 10% of that year's revenues. Assume return of NWC at end of 5 years
Tax rate = 40%
Hurdle rate = 8%
Prepare a 5 year schedule showing cash flow to the firm. Calculate NPV, IRR