Create an Excel spreadsheet for a production plant that the company
will lease for 5 years at US$1,500,000 per year; it will cost the firm
US$4,000,000 in capital (straight-line depreciation, 5 year life) in
year 0; it will cost the firm an additional US$150,000 per year after
the new production plant is brought online for other expenses; and it
will generate an incremental revenue of US$3,500,000 per year. Use a
40% tax rate, a 10% cost of capital, and a 12% re-investment rate.
Assume the company will use cash flow to finance the project.
Discuss how the project would fair under hurdle rate scenarios of 10%,
15%, and 20% (based on MIRR).