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answers to A-F please! Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is
answers to A-F please!
Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.77 million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $47,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: - Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $10.10 million per year in additional sales, which will continue for the 10 -year life of the machine - Operations: The disruption caused by the installation will decrease sales by $5.03 million this year. As with Billingham's existing products, the cost of goods for the products produced by the XC-750 is expected to be 74% of their sale price. The increased production will also require increased inventory on hand of $1.07 million during the life of the project, including year 0 . - Human Resources: The expansion will require additional sales and administrative personnel at a cost of $2.07 million per year. - Accounting: The XC-750 will be depreciated via the straight-line method over the 10-year life of the machine. The firm expects receivables from the new sales to be 14% of revenues and payables to be 9% of the cost of goods sold. Billingham's marginal corporate tax rate is 30%. a. Determine the incremental earnings from the purchase of the XC-750 b. Determine the free cash flow from the purchase of the XC750 c. If the appropriate cost of capital for the expansion is 10.1%, compute the NPV of the purchase d. While the expected new sales will be $10.10 million per year from the expansion. estimates ranqe from $8.20 million to $12.00 million. What Calculate the incremental earnings from the purchase of the XC-750 below (with vs. without XC-750). (Round to thlnearest dollar) Step by Step Solution
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