Answer 1

Estimation of Cash Flows (000's)

Year 0 1 2 3
Projected Revenue 1,972,518.69 1,972,518.69 1,972,518.69
Yearly Recurring SaaS -600000 -600000 -600000
Implientation Costs -900000

Projected Net Savings (900,000.00) 1,372,518.69 1,372,518.69 1,372,518.69

NPV 2,284,773
IRR 142%

Projected Revenue Calculations

Addresable Spend Currently 523,909,636.00

Estimated Spend Under Management @ 298,628,492.52
57%

Savings from Automation

Annual Savings in Supplier Management 406,592.40
FTE's
Overall Savings in Supplier Management 4,065,924.00 Assuming
employees
stay for 10
years. Overall
savings

Savings in Purchase Order Volume 827,469.39

Savings in Invoice Processing Costs 919,380.75
Loss in Discount in Spend Source (104,781.93)
Overall Profit 5,917,556.07
Compounding Factor
Exhibit 3 Additonal Assumptions.

Risk-free Rate (Rf) 5.0%

Project Cost of Debt (Rd) 6.8%
Market Risk Premium 7.2%
Marginal Corporate Tax Rate 40%
Project Debt Beta (βd) 0.25
Asset Beta for Kramer.com and Cityretrieve.com 1.50
Calculate Beta Asset

Answer 1
For fully financed - Beta of Asset = Beta of Equity 1.50
Unlevered Cost of Capital 15.80%

Answer 2
Debt 750,000
Equity 750,000
Marginal Corporate Tax Rate 40%

Interest Tax Shield (in 000's) 300.00

Answer 3
Debt/MV Ratio 25%
Equity/MV Ratio 75%
Debt to Equity Ratio 33.33%
Levered Beta Equity

Return on Equity for Levered Firm (Re) 18.800%

Return on Debt 6.800%

Cost of Debt to be included in WACC 1.02%

Cost of Equity to be included in WACC 14.100%

WACC (Post Tax) 15.1200%

Answer 4
Debt/MV Ratio 25%
Equity/MV Ratio 75%
Debt to Equity Ratio 33.33%
Levered Beta Equity

Return on Equity for Levered Firm (Re) 18.800%

Return on Debt 6.800%

Cost of Debt to be included in WACC 1.70%

Cost of Equity to be included in WACC 14.100%

WACC (Pre Tax) 15.8000%