QUESTION 1

IRON WOMAN PROJECT

Q1.
IRON WOMAN
Income Statement
Revenue/Income
Operating Cost
Fixed Cost
Bank interest
Depreciation

Year 0

Net Profit
Tax Payable @ 30%
Net Profit After Tax
Cash Flow Statement
Revenue
Operating Cost
Fixed Cost
Bank interest
Plant & Equipment
Working Capital
Start-up
Market research
Conversion cost
Total

$13,050,000.00
$1,200,000.00
$1,000,000.00
$250,000.00
$220,000.00

$13,050,000.00
$1,200,000.00
$1,000,000.00
$250,000.00
$220,000.00

$13,050,000.00
$1,200,000.00
$1,000,000.00
$250,000.00
$220,000.00

$13,050,000.00
$1,200,000.00
$1,000,000.00
$250,000.00
$220,000.00

$13,050,000.00
$1,200,000.00
$1,000,000.00
$250,000.00
$220,000.00

$10,380,000.00
$3,114,000.00
$7,266,000.00

$10,380,000.00
$3,114,000.00
$7,266,000.00

$10,380,000.00
$3,114,000.00
$7,266,000.00

$10,380,000.00
$3,114,000.00
$7,266,000.00

$10,380,000.00
$3,114,000.00
$7,266,000.00

$13,050,000.00
$1,200,000.00
$1,000,000.00
$250,000.00

$13,050,000.00
$1,200,000.00
$1,000,000.00
$250,000.00

$13,050,000.00
$1,200,000.00
$1,000,000.00
$250,000.00

$13,050,000.00
$1,200,000.00
$1,000,000.00
$250,000.00

$13,050,000.00
$1,200,000.00
$1,000,000.00
$250,000.00

($1,100,000.00)
($1,500,000.00)
($4,000,000.00)
($5,000,000.00)
($2,500,000.00)
($14,100,000.00)

$1,500,000.00

Net Cash Flow

Discount Factor @ 20%
Discounted Cash Flow

($3,500,000.00)
0.8333
($2,916,550.00)

$10,600,000.00
0.6944
$7,360,640.00

$10,600,000.00
0.5787
$6,134,220.00

$10,600,000.00
0.4823
$5,112,380.00

$12,100,000.00
0.4019
$4,862,990.00

Net Cash Flow

Discount Factor @ 35%
Discounted Cash Flow
Calculations
NPV
IRR
Payback Period

($3,500,000.00)
0.7400
($2,590,000.00)
At 20%
$20,553,680.00
61%

$10,600,000.00
0.5487
$5,816,220.00
At 35%
$13,084,220.00

$10,600,000.00
0.4060
$4,303,600.00

$10,600,000.00
0.3010
$3,190,600.00

$10,600,000.00
0.2230
$2,363,800.00

IRON MAIDEN PROJECT

1 year 33 days

Q1.
IRON MAIDEN
Income Statement
Revenue/Income
Operating Cost
Fixed Cost
Bank interest
Depreciation

Year 0

Net Profit
Tax Payable @ 30%
Net Profit After Tax
Cash Flow Statement
Revenue/Income
Operating Cost
Fixed Cost
Bank interest
Plant & Equipment
Working Capital
Start-up
Market research
Conversion cost
Total

$14,029,000.00
$1,000,000.00
$1,000,000.00
$50,000.00
$200,000.00

$14,029,000.00
$1,000,000.00
$1,000,000.00
$50,000.00
$200,000.00

$14,029,000.00
$1,000,000.00
$1,000,000.00
$50,000.00
$200,000.00

$14,029,000.00
$1,000,000.00
$1,000,000.00
$50,000.00
$200,000.00

$14,029,000.00
$1,000,000.00
$1,000,000.00
$50,000.00
$200,000.00

$11,779,000.00
$3,533,700.00
$8,245,300.00

$11,779,000.00
$3,533,700.00
$8,245,300.00

$11,779,000.00
$3,533,700.00
$8,245,300.00

$11,779,000.00
$3,533,700.00
$8,245,300.00

$11,779,000.00
$3,533,700.00
$8,245,300.00

$14,029,000.00
$1,000,000.00
$1,000,000.00
$50,000.00

$14,029,000.00
$1,000,000.00
$1,000,000.00
$50,000.00

$14,029,000.00
$1,000,000.00
$1,000,000.00
$50,000.00

$14,029,000.00
$1,000,000.00
$1,000,000.00
$50,000.00

$14,029,000.00
$1,000,000.00
$1,000,000.00
$50,000.00

($1,000,000.00)
($1,500,000.00)
($5,000,000.00)
($1,000,000.00)
($500,000.00)
($9,000,000.00)

$1,500,000.00

Net Cash Flow

Discount Factor @ 20%
Discounted Cash Flow

$2,979,000.00
0.8333
$2,482,400.70

$11,979,000.00
0.6944
$8,318,217.60

$11,979,000.00
0.5787
$6,932,247.30

$11,979,000.00
0.4823
$5,777,471.70

$13,479,000.00
0.4019
$5,417,210.10

Net Cash Flow

Discount Factor @ 35%
Discounted Cash Flow

$2,979,000.00
0.7400
$2,204,460.00

$11,979,000.00
0.5487
$6,572,877.30

$11,979,000.00
0.4060
$4,863,474.00

$11,979,000.00
0.3010
$3,605,679.00

$11,979,000.00
0.2230
$2,671,317.00

Calculations
NPV
IRR
Payback Period

At 20%
$28,927,547.40
68%

At 35%
$19,917,807.30

274 days

QUESTION 2 (100

WORDS)

Mr. Stark should choose Iron Maiden because:

Payback period of Iron Maiden is less than Iron Woman 1 year
33 days. This means Mr. Stark can have the shorter payback period
with Iron Maiden and it means that the company can minimize the risks
related to the time.
NPV of Iron Maiden is $28,927,547.40, higher than Iron Woman $20,553,680.00 at the required rate of return 20%.
Iron Maidens IRR is 68%, higher than Iron Woman 61%. Hence,
the return of Iron Maiden when there is a change in cost of capital
(20% to 35%) is higher than Iron Woman.

QUESTION 3
Assuming that Tony Stark issues 1 million bonds.
Face Value (FV) = $9,000,000 / 1,000,000 = $9.00
Number of coupon payment: 5 2 = 10
Value of coupon payment: 0.09 / 2 $9 = $0.405
Semi-annual rate of return: 10 / 2 = 5%
1[
Bond Price=0.405

1
]
( 1+ 0.05 )10
9
+
=$ 8.65
0.05
(1+0.05)10