Group project 2
(Follow the instruction of Group project-part 2.pdf
Key informationAssume that the business opportunity lasts for five years. You needto make assumptions (or predictions) for some key inputslisted below. You can use financial information from the company or its industry average you chose in Part 1, if your hypothetical business idea is in the same industry.Alternatively,make up your own assumptions. Make sure you indicate in your response what assumptions you make and why(i.e.,you should try to base your analysis on well–groundedfacts and assumptions).You can look up financial data for all public firms from Yahoo Finance, in case you need guidance on your assumptions (e.g., sales growthor the ratio of net working capital to sales).1.What are theinitial sales(year 1)?2.What is the annual sales growth (years2to 5)?3.What arethe operating expenses (as a % of sales) and what arethefixed costs? 4.What is the upfront investment in net fixed assets(i.e., the initial capital spending)you need to make today (year 0)?Depreciate the value of these assetson astraight–line basisto zeroover the five–yearhorizon. 5.What is the salvage value of these assetsat the end?(has to be a positive number)6.What is your upfront investment in net working capital (year 0)? 7.Starting in year 1, net working capital (the liquidity you need) will be based on how much are your sales. How much (as a % of sales) do you need to retain in NWC every year? (for example, you can assume that you need NWC equal to 10% of sales each year after year 0 and then figure out the change in NWC each year). The last year you assume that you recover all the dollar amount invested during this period in NWC.8.Use 21% asthe corporate tax rate (current US rate).
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