Discount rate, NPV, Monte Carlo simulation, tax shield

Questions to be answered: Question 1 - What is the appropriate discount rate that Flash should use to discount after-tax free cash flows. Fully explain your reasoning and the assumptions implicit in this statement. - Under the assumption that Flash does NOT invest in the new project, forecast the income statement and balance sheet for the years ended 2010, 2011, and 2012. - Should Flash undertake the project? - You are concerned about three inputs to the NPV calculation: the size of the required working capital, the size of the cost of goods sold, and the amount to be spent on advertising for product launch. In particular you are quite unsure how accurate the numbers used to compute base-case NPV are. To account for this uncertainty compute using a Monte Carlo simulation the standard deviation of the NPV allowing for the required working capital as a percentage of sales to be normally distributed with mean 26.15% of sales and a standard deviation of 7.5%, and cost of goods sold to be normally distributed with a mean of 79% of sales and a standard deviation of 7.5%; and finally the advertising and promotion costs to be normally distributed with mean $300K and standard deviation of 50K. Use at least 1000 simulations in your calculation and comment on the magnitude of the variability in NPV across simulations. Question 2. - How does the tax shield of debt affect project valuation under the standard free-cash flow method of computing NPV as opposed to the APV method? What assumptions are used in both. Are any of the assumptions likely to be violated when using these methods in practical calculations? Which method would be preferable? The analysis needs to be completed by Sunday, so the freelancer should be able to work efficiently and meet deadlines.