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FIN571 Week 4 Individual Assignment Guillermo Furniture Store Analysis

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Discounted Cash Flow Analysis
Investment $300,000
Annual Return $42,577
Discount Rate 9.00%
NPV ($26,755)
IRR 6.9% DISCOUNTED CASH FLOW
Payback 9.9 Sub Total
Yr 0 1 2 3 4 5 6 7 8 9 10 Total
Cash Flow (300,000) 42,577 42,577 42,577 42,577 42,577 42,577 42,577 42,577 42,577 42,577
Disc. rate 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00%
1+ rate 1.09 1.09 1.09 1.09 1.09 1.09 1.09 1.09 1.09 1.09 1.09
Exponent 0 1 2 3 4 5 6 7 8 9 10
1.00 1.09000 1.19 1.30 1.41 1.54 1.68 1.83 1.99 2.17 2.37
(300,000) 39,061 35,836 32,877 30,163 27,672 25,387 23,291 21,368 19,604 17,985 (26,755)
Cum'l CF (300,000) (260,939) (225,102) (192,225) (162,062) (134,390) (109,003) (85,712) (64,344) (44,740) (26,755) (26,755)
PV Alternative Calc. (300,000) 39,061 35,836 32,877 30,163 27,672 25,387 23,291 21,368 19,604 17,985
---NPV ---Excel calc.
Simple Payback = Investment / Annual return 7.05 years
Internal Rate Of Return 6.9%
Discounted Payback - calculate using discounted returns
example number of whole years 4
Fraction of last year 5.9
DCF payback 9.9
(1+int rate)
n
PV = value / (1+int rate)
n
CF

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Capital Structure
Bank Loans 965,866
Equity 235,805
Capital Asset Pricing Model
Rf 4.0%
Rm 12.0%
beta 1.5
CAPM formula:
Ke = Rf + b(Rm - Rf)
Ke = .04+ 1.5(.12 - .04)
Ke = .04+ 1.5(.08)
Ke = .04+ .12
Ke = 16.0%
16.0%

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Anonymous
Awesome! Perfect study aid.

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