This questiоn is wоrth 30 pоints. Pleаse use the Excel file to finish this question. Templаte_Mаkeup Essay Question 2025.xlsx Here are the details of the question: BMBA 9460 group is carrying out a set of analysis to decide whether to start a new company called MBA Starters Inc (MS). If we start MS in 2025, MS will have no sales in 2025. MS is expected to have sales of $50 million in 2026 and the sales will grow at the rate of 15% in 2027; 30% in 2028; 10% in 2029; and 2% from 2030 on forever. We expect that net income will be 48% of sales (based on the estimation that EBIT to be 60% of sales and we have to pay a corporate tax rate of 20%). We expect that increases in net working capital requirements to be 9% of any increase in sales, capital expenditures to be 7% of sales, and depreciation expenses to be 6% of sales. The weighted average cost of capital is estimated to be 13%. To start the company, we need to invest $250 million at the end of 2025. As a potential CEO, would you recommend us to start the new company based on the NPV? What’s the potential value of this decision? (hint: The potential value can be measured using the NPV of the project.) If we are planning for an IPO at the beginning of 2026 to sell all the equity for 20 million shares, what is the fair price for each share of our company stock? What’s the internal rate of return (IRR) of the project assuming that we invest and sell the firm at the beginning of 2031? Would you recommend us to start the new company based on the IRR? More specifically, (2 points) the sales in 2031 is calculated as __________× _________ = __________; (2 points) the net income in 2030 is calculated as __________× _________ = __________; (2 points) the depreciation in 2029 is calculated as __________× _________ = __________; (2 points) the capital expenditure in 2028 is calculated as __________× _________ = __________; (3 points) the increase in the net working capital in 2027 is calculated as __________________________________________ = __________; (3 points) the free cash flow in 2026 is calculated as ___________________________________________________________ = __________; (3 points) the terminal firm value at the beginning of 2031 is calculated as ___________________________________________________________ = __________; (3 points) the total firm value at the beginning of 2026 is calculated as ___________________________________________________________ = __________; (2 points) the fair stock price at the IPO is calculated as ________________________________________________________ = __________per share; (3 points) the NPV of this project before we make any investment is calculated as (You can either write the formula for the NPV calculation or the financial keys that you use to calculate the NPV here.) ___________________________________________________________ = __________; (1 point) based on this NPV, we ___________________(should or shouldn’t) start the new company. (3 points) The internal rate of return (IRR) of the project assuming that we invest and sell the firm at the beginning of 2031 is ___________________________%. (1 point) based on this IRR, we ___________________(should or shouldn’t) start the new company. Extra point questions: Sensitivity Analysis (1 point) Based on the following input variables to carry out sensitivity analysis of NPV over Sales and Required Return respectively. Variable Pessimistic Expected Optimistic Sales of 2026 ($million) 25 50 100 Required Return 16% 13% 10% NPV using Sensitivity Analysis ($million) Pessimistic Expected Optimistic Sales of 2026 Required Return Scenario Analysis (1 point) Based on the following input variables to carry out scenario analysis of NPV over pessimistic, expected, and optimistic scenarios. Explain why the results scenario analysis are generally different from those from sensitivity analysis. Variable Pessimistic Expected Optimistic Sales of 2026 ($million) 25 50 100 Required Return 16% 13% 10% NPV using Sensitivity Analysis ($million) Pessimistic Expected Optimistic NPV If you used the Excel template file, please upload your completed Excel file at the end of the exam for this question. If you did not use the Excel file, you may type your answer in the text field. If you upload your Excel file, please name it LastName_FirstName_Essay.xlsx.