Infomercial Entertainment, INC Project Appraisals

Infomercial Project Depreciation Rates of MACRSYear Recovery Percentage

Selling Price of Infomercial $10 1 20%Total Production of 1993 (Units) 5000 2 32%Production Cost (%age of SP) 50% 3 19%Labor Cost (%age of SP) 12% 4 12%Sales Growth Rate per Year 5% 5 11%Working Capital Required $10,000 6 6%Initial Cost of Equipment $200,000 Delievery Cost $25,000 Total Cost of Equipment $225,000Equipment Scrap Value $20,000

Official Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Project Year 0 1 2 3 4 5 6 7 8 9 10

Production   5,000 5,250 5,513 5,788 6,078 6,381 6,700 7,036 7,387 7,757 Sales   50,000 52,500 55,125 57,881 60,775 63,814 67,005 70,355 73,873 77,566 Less Production Cost   25,000 26,250 27,563 28,941 30,388 31,907 33,502 35,178 36,936 38,783 Less Labor Cost   6,000 6,300 6,615 6,946 7,293 7,658 8,041 8,443 8,865 9,308 Less Deprecition   45,000 72,000 42,750 27,000 24,750 13,500 0 0 0 0 Net Income   (26,000) (52,050) (21,803) (5,005) (1,655) 10,749 25,462 26,735 28,072 29,475 Taxes   (9,100) (18,218) (7,631) (1,752) (579) 3,762 8,912 9,357 9,825 10,316 NOPAT   (16,900) (33,832) (14,172) (3,253) (1,076) 6,987 16,550 17,378 18,247 19,159

FREE CASH FLOWSNOPAT   (16,900) (33,832) (14,172) (3,253) (1,076) 6,987 16,550 17,378 18,247 19,159 Add Depreciation   45,000 72,000 42,750 27,000 24,750 13,500 0 0 0 0 Free Cash Flows for the year   28,100 38,168 28,578 23,747 23,674 20,487 16,550 17,378 18,247 19,159

Undiscounted Payback PeriodInitial Investment 225000Investment recovered 28,100 38,168 28,578 23,747 23,674 20,487 16,550 17,378 18,247 19,159

Investment Left 196900 158,732 130,154 106,40

82,733 62,246 45,696 28,318 10,071 (9,087)

Infomercial Entertainment, INC Project Appraisals

Training Video Project Depreciation Rates of MACRSYear Recovery Percentage

Selling Price $8 1 20%Total Demand of 1993 (Units) 4375 2 32%Production Cost (%age of SP) 43% 3 19%OverHeads (%age of SP) 10% 4 12%Sales Growth Rate per Year 7% 5 11%Working Capital Required $5,000 6 6%Initial Cost of Equipment $200,000 Delievery Cost $25,000 Total Cost of Equipment $225,000Equipment Scrap Value $20,000

Official Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Project Year 0 1 2 3 4 5 6 7 8 9 10

Production   4,375 4,681 5,009 5,360 5,735 6,136 6,566 7,025 7,517 8,043 Sales   35,000 37,450 40,072 42,877 45,878 49,089 52,526 56,202 60,137 64,346 Less Production Cost   15,050 16,104 17,231 18,437 19,727 21,108 22,586 24,167 25,859 27,669 Less Overheads   3,500 3,745 4,007 4,288 4,588 4,909 5,253 5,620 6,014 6,435 Less Deprecition   45,000 72,000 42,750 27,000 24,750 13,500 0 0 0 0 Net Income   (28,550) (54,399) (23,916) (6,848) (3,187) 9,572 24,687 26,415 28,264 30,243 Taxes   (9,993) (19,039) (8,371) (2,397) (1,116) 3,350 8,640 9,245 9,892 10,585 NOPAT   (18,557) (35,360) (15,545) (4,451) (2,071) 6,222 16,047 17,170 18,372 19,658

FREE CASH FLOWSNOPAT   (18,557) (35,360) (15,545) (4,451) (2,071) 6,222 16,047 17,170 18,372 19,658 Add Depreciation   45,000 72,000 42,750 27,000 24,750 13,500 0 0 0 0 Free Cash Flows for the year   26,443 36,640 27,205 22,549 22,679 19,722 16,047 17,170 18,372 19,658

Undiscounted Payback PeriodInitial Investment 225000Investment recovered 26,443 36,640 27,205 22,549 22,679 19,722 16,047 17,170 18,372 19,658

Investment Left 198,557 161,917 134,712 112,16

89,484 69,762 53,716 36,546 18,174 (1,484)

PAYBACK PERIODNo. of Years

Infomercial 10Training 10Combined 6

MODIFIED PAYBACK PERIODNo. Of Years No. of Months No. of Days

Infomercial 9 6 10Training 9 11 3Combined 5 7 6

DISCOUNT RATE =

NPV Calculations 12%

Official Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Project Year 0 1 2 3 4 5 6 7 8 9 10

Infomercial ProjectCash Flows

(225,000)28,10

0 38,16

8 28,57

8 23,747

23,674

20,487 16,550 17,378 18,247 19,159

Working Capital Requirement (10,000) 0 0 0 0 0 0 0 0 0 0 Recovery of Working Capital 0 0 0 0 0 0 0 0 0 0 10,000

Total Cash Flow(235,000)

28,100

38,168

28,578

23,747 23,67

4 20,487 16,550 17,378 18,247 29,159

NPV ($80,147)IRR

0.75645%

Training Video ProjectCash Flows (225,000)

26,443

36,640

27,205 22,549

22,679 19,722 16,047 17,170 18,372 19,658

Working Capital Requirement (5,000) 0 0 0 0 0 0 0 0 0 0 Recovery of Working Capital 0 0 0 0 0 0 0 0 0 0 5,000

Total Cash Flow(230,000)

26,443

36,640

27,205

22,549 22,67

9 19,722 16,047 17,170 18,372 24,658

NPV ($82,026)IRR

0.12800%

Combined ProjectCash Flows

(225,000)38,79

3 49,60

8 40,82

0 36,845

37,690

35,484 32,597 34,548 36,618 38,817

Working Capital Requirement (15,000) 0 0 0 0 0 0 0 0 0 0 Recovery of Working Capital 0 0 0 0 0 0 0 0 0 0 15,000

Total Cash Flow(240,000)

38,793

49,608

40,820

36,845 37,69

0 35,484 32,597 34,548 36,618 53,817

NPV ($13,171)IRR

10.45584%