1) What is the goal of a financial manager? How is the goal of a financial manager related to NPV? How is the goal of a financial manager related to stakeholders? [10 points] 2

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1) What is the goal of a financial manager? How is the goal of a financial manager related to NPV? How is the goal of a financial manager related to stakeholders? [10 points] 2. You are considering opening a new plant. The plant will cost $96.4 million up front. It is expected to produce profits of $28.7 million at the end of every year, starting year 1. The cash flows are expected to last forever. There are 2 million shares outstanding. [15 points] a. Calculate the NPV of this investment opportunity if your cost of capital is 8.9%. Should you make the investment? b. Current stock price is $50. What is the impact of this project on the stock price? c. Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. 3. Your company invested $5 million in marketing campaign to assess the demand for the product Minish. This product will be in the market next year and will last five years. Revenues are projected to be $50 million per year along with expenses of $20 million. You will need to spend $20 million immediately on equipment that will be depreciated using straight line depreciation to zero. Additionally, you will use some fully depreciated existing equipment that has a market value of $4 million. Finally, the working capital levels will increase from their current level of $5 million to $15 million immediately. They will remain at the elevated level until year 5, when they will return to $5 million. The discount rate for this project is 5% and its tax rate is 30%. Based on this information, [25 points] a. Calculate the free cash flow of the project for each year. Please show your work in an excel file b. Write down the NPV equation based on a. Calculate NPV of the project. Will you accept the project? c. Write down the IRR equation based on a. Calculate IRR of the project