1 Current Designs manufactures kayaks. Pedal Boats, Inc. has approached Current Designs about using its rotomold expertise and equipment to produce some pedal boat 2 components for Pedal Boats Inc.. Current Designs is interested in exploring this opportunity, but is concerned that the pedal boats are a different shape than the kayaksit currently 3 produces. Current Designs would need to buy an additional rotomoldoven in order to produce the pedal boat components. This project clearly involves risks, and management 4 wants to ensure the returns justify the risks. 6 7 As an intern at Current Designs, you have been asked to prepare an initial evaluation of this proposal. To aid in your analysis, the following information and assumptions have been 8 provided. Present Value tables are include in the 2nd worksheet tab for your use. Enter labels, cell references, formulas, and typed answers where indicated. 10 -Cost of the new rotomoldoven $256,000 Useful life of the new rotomoldoven in years 11 Salvage Value of the new rotomoldoven $8,000 Depreciation Method Straight line 12 -Discount Rate 15% Projected Annual Net Income for this project $ 15,200 Home Insert Draw Page Layout Formulas Data Review View Tell me v Calibri (Body) 11 VA A General Conditional Formatting Format as Table Cell Styles Paste B 1 U av A $ % LA! ! G24 x fx N B D F G H K L M 14 1. Compute Annual Depreciation Expense. 2. ComputeNet Annual Cash Flows 15 Depreciable Cost $248,000 Annual Net Income $ 15,200 16 Estimated Life 8 ADD: Depreciation Expense $31,000 17 Annual Depreciation Expense $31,000 Net Annual Cash Flows $ 46,200 18 19 3. Compute the Payback period. 20 Initial Cost $256,000 5.5411255 years 21 Annual Cash Flows $ 46,200 22 23 4. What is the approximate Internal Rate of Return S. Based on the internal Rate of Return, would this project be acceptable? Explain. 12% 24 of this project? 25 26 27 6. Use the space below to create your own net present value analysis. Your analysis should show all 7. Based on your Net Present Value Analysis, would 28 components used to compute net present value. In addition, you should, whenever possible, incorporate this project be acceptable? Explain. 29 formulas and cell references in your analysis. You do not have to use all of the space provided. If you prefer, 30 you can add an additional sheet to this file and create your analysis there. Type Answer 31 Cash Flow Discount Present Value 32 Factor 33 Type Cell reference Value Formula 8. Change the tab name to Run 1 34 Type Cell reference Value Formula 9. Copy the tab and name it Run 2 and update with 35 Type Formula the following information: 36 Type Cell Reference Cost of the new rolomoldoven $ 240,000 37 Type Formula Projected Annual Net Income $ 23,910 38 39 10. Save the file and upload to blackboard by the due date 40 41 42 Run 1 PRESENT VALUE TABLES +
