Preview Question 1
Calculation of the discount rate:
Discount rate = 1.5 x WACC
= 1.5 x .12
=18%
Cashflow Analysis
Year 0 1 2 3 4 5 6
Sales 40 000 000 80 000 000 60 000 000 70 000 000 100 000 000 80 000 000
Cost of sales -32000000 -64000000 -48000000 -56000000 -80000000 -64000000
Depreciation -8000000 -8000000 -8000000 -8000000 -8000000
Net operating cash flows 0 8 000 000 4 000 000 6 000 000 12 000 000 16 000 000