Return on InvestmentProblem 1. ChemTech – Free Cash Flow 0

Chemtec is undertaking a project that will require an upfront investment today in net working capital, and plant and equipment (i.e., capital expenditures) of

$100 million and $200 million, respectively. If there are no revenues or expenses expected until next year, what is the project’s free cash flow today in millions of dollars?

*Make sure to input all currency answers without any currency symbols or commas, and use two decimal places of precision.

Problem 2. ChemTech – Free Cash Flow 1

Continuing from Problem 1, at the end of the first year, Chemtec is expecting sales of $250 million and costs of $125 million.

There are no more required investments in either net working capital or plant and equipment.

However, the existing plant and equipment will experience $50 million of depreciation.

Assume that Chemtec’s marginal tax rate on earnings is 35%.

Assuming that all of these cash flow occur at the end of the first year, what is the first year’s free cash flow?

*Make sure to input all currency answers without any currency symbols or commas, and use two decimal places of precision.

Problem 3. Jones – NPV

Jones Corp is evaluating a project that has the following annual free cash flows:

If the project’s discount rate is 12%, then what is the NPV of the project?

*Make sure to input all currency answers without any currency symbols or commas, and use two decimal places of precision.

Problem 4. Donald’s – IRR

Donald’s Inc. is evaluating a project that has the following annual free cash flows:

What is the project’s IRR?

*Make sure to input all percentage answers as numeric values without symbols, and use four decimal places of precision. For example, if the answer is 6%, then enter 0.0600.

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