Your firm may purchase certain assets from a strugglingcompetitor. The competitor is asking $50,000,000 for the assets.Last year, the assets produced revenues of $15,000,000. Revenuesearned in the next year (i.e., year 1) and in future years areestimated using the information in the table below.

Your staff expects that the following assumptions will hold overthe operating period:

• The assets will be viable for another 10 years but will beworthless at the end of the 10 year period
• The assets are qualified by the IRS for depreciation using thestraight-line method
• A constant tax rate of 20%

Your staff has also identified three key areas of uncertainty,which include

	Worst-Case	Base-Case	Best-Case
Cash Expenses as a % of Revenues	60%	55%	45%
WACC	20%	15%	8%
Revenue Growth Rate	-10%	0%	7%
Probability	10%	80%	10%

For this case, address the following goals (each goalshould be shown in a separate worksheet in an Excel workbook;provide labels on each worksheet):

Goal 1- Develop the annual pro forma after-taxcash flow statement for each scenario.

Goal 2- Calculate the NPV and IRR for eachscenario. Within the Goal 2 worksheet, discuss/interpret the NPVand IRR values that you have calculated in terms of whether theacquisition should be accepted or rejected.

Goal 3- Use the probability distribution givenalong with your estimates from Goals 1 and 2 to calculate theexpected value of the NPV and IRR for acquiring the assets.Interpret the expected values for both capital budgeting measures(compare your estimate of the expected value of the IRR to abenchmark IRR of 14.8%).

Goal 5- Discuss three ways in which yourfinancing modeling assumptions may be incorrect and state theassociated impact on the ATCFs, NPV and IRR. Your discussion shouldbe at least 250 words. Proof read before submitting.