Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Anyone can help me do those 2 assignments that are attached below? Individual Assignment Deliverable Length: 300-550 words Format Word Document Apex Printing's board of

Anyone can help me do those 2 assignments that are attached below?

image text in transcribed Individual Assignment Deliverable Length: 300-550 words Format Word Document Apex Printing's board of directors has recently completed its multi-year strategic plan. The Chief Executive Officer (CEO), John Matthews, and the Vice President (VP) of Sales and Administration, James Simeon, meet with you and Mary Francis to discuss it. Included in the plan is an intent to diversify Apex's current product line to include food packaging. Additional investment is required for this expansion; equipment and inventory will need to be procured and placed in service. Primary Task Response: Respond to the following scenario with your thoughts, ideas, and comments. This will be the foundation for future assignments. Be substantive and clear, and use examples to reinforce your ideas. As the VP of Finance, you will soon need certain information for computing the net present value (NPV) and the internal rate of return (IRR) for Apex's expansion project. The calculations will be presented to the board at the next quarterly meeting for approval. Today, you are in a meeting with CEO John Matthews and Luke Stewart, VP of Production and Supply Chain, discussing the information. Luke is excited about the prospect of going into another line of business and he says, \"I know our employees will be eager to learn new processes if it means long-term job security and profitability for the company.\" \"Everyone will benefit if we are able to implement the project,\" says John. \"So to gather enough capital, we must present an appealing prospectus to shareholders and bondholders. Naturally, investors want some assurance that their investment will yield returns; and it's up to us to properly assess our project given the cost of capital.\" You nod in agreement and say, \"We need everyone in the organization to have an appreciation for these calculations and the information that goes into them. These estimates are important because the board's approval will allow the company to diversify into the food packaging business.\" Luke holds out both hands and says, \"You know, my understanding is somewhat basic on the two theoretical approaches you've talked about. Let's go over some of the basics now so my grasp of the financial end of this is clearer.\" \"Good idea, Luke,\" you say. \"I'll prepare brief definitions of the project financial valuation methodologies NPV and IRR.\" You also need to explain the following to Luke: How the application of weighted average cost of capital (WACC) would be applied to each method How companies assess the feasibility of a project according to these valuation methodologies \"That would be a big help,\" says Luke. \"Thanks.\" \"Once you get my explanations, you'll be able to explain it to others,\" you say. Forecasting of Annual Cash Flows Depreciation= ( Cost of the asset/life) Year 0 1 2 3 4 5 $0 $0 $0 $0 $0 Revenue Gross Margin (Gross Margin %* Revenue) Less Depreciation Less SG& A expenses Operating Income Less Taxes PAT Operating Cash flow ( PAT+Depreciation) Recovery of Working Capital Initial Investment Net Cash flows Cost of Capital Time/yr Cash flow Input here Discounted CF NPV IRR $0 1.00% 0 $0.00 0 1 2 3 4 5 $0.00 $0.00 $0.00 $0.00 $0.00 0 0 0 0 0 =cf1/((1+n)^1) =cf2/((1+n)^2) =cf3/((1+n)^3)=cf4/((1+n)^4)=cf5/((1+n)^5) Assignment Deliverable Length: Completed worksheet Respond to the following scenario with your thoughts, ideas, and comments. Be substantive and clear, and use research to reinforce your ideas. Over lunch, you and Mary meet to discuss next steps with the expansion project. \"Do we have everything we need on sales and costs?\" you ask. \"It must be time to compute the net present value (NPV) and internal rate of return (IRR) of the Apex expansion project.\" \"We have the data from James and Luke regarding projected sales and costs, respectively, for the food packaging project,\" says Mary. \"It is feasible to project that we will receive a tax break from this implementation. I have information from our audit firm, which indicates that future depreciation methods for taxes will be straight-line; however, the corporate rates will be reduced to 35% as we assumed in our weighted average cost of capital (WACC) calculation.\" \"That sounds good,\" you say. \"Right," says Mary. "You can use the WACC of 5% listed in the excel file posted for the computation of the NPV and comparison for IRR." \"I've got the information I need from Luke and James,\" you say. "Does this look right to you? Here's what they gave me,\" you say, as you hand a sheet of paper to Mary. \"Let's look at this now while we're together,\" she says. The information you hand to Mary shows the following: Initial investment outlay of $30 million, consisting of $25 million for equipment and $5 million for net working capital (NWC) (plastic substrate and ink inventory); NWC recoverable in terminal year Project and equipment life: 5 years Sales: $28 million per year for five years Assume gross margin of 55% (exclusive of depreciation) Depreciation: Straight-line for tax purposes Selling, general, and administrative expenses: 10% of sales Tax rate: 30% You continue your conversation. \"It looks good,\" says Mary. \"Use this information from Luke and James to compute the cash flows for the project.\" \"No problem,\" you say. \"Then, compute NPV and IRR of the project using the Excel spreadsheet I sent earlier today,\" says Mary. \"Use the IRR financial function for the computation of IRR.\" \"Okay,\" you say. "I'll submit my Excel file showing the computation of cash flows, NPV, and IRR by the end of week so you can look at it over the weekend.\" \"Thanks,\" says Mary. To recap: Complete the above worksheet for this assignment

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

MATLAB An Introduction With Applications

Authors: Amos Gilat

6th Edition

111938513X, 978-1119385134

More Books

Students also viewed these Finance questions

Question

In Problems, graph the functions. y = log 5 x

Answered: 1 week ago