Assignment Details Chapter 5 - Investment Decisions: Look Ahead and Reason Back-In Froeb Luke M; McCann, Brian T:Shor, Michael and Ward, Michael Managerial Fconomics, 5 Edition, Cengage Learning 2018 discusses cost of capital compounding and discounting concepts, and net present valle analysis Students should use that information to assess the following capital Investment: . Superior Machining Inc, a mid-size machining company.is considering an expansion of its product line. In order to do se, it must install new equipment at an expected cost of $2 million Management is looking to fund the entire investment with equity, the providers of which expect a 14% return . Based on its experience with prior investments of the same type management has developed the following estimates Year Equipment Revenue Operating Tax Purchase Cost Depreciation 0 $2,000,000 1 $300,000 $200,000 10 2 $600,000 $200.000 24.5% $750,000 $200,000 175% 4 $750,000 $200,000 12.5% 5 $750,000 $200 000 89% $750,000 $200,000 8 7 $750,000 $200,000 899 $750,000 $200,000 LS $750,000 $200,000 10 $750,000 $200.000 3 6 9 The combined federal and state income tax rate for Superior is 26% Note: Tax Depreciation is a non-cash charge, meaning that it can be defected as expense when computing taxable income even though it does not represent an actual cash outley The first part of this assignment requires the student te perform a simple discounted cash flow analysis to determine whether Superior should invest in the new equipment based on its net present value The second part of the assignment requires the student to identify and explain as needed significant uncertainties and/or besiness risks that Superior's management team should also consider before making the investment In the third and final part of the assignment, the student should make a recommendation as to whether Superior should proceed with the Investment. The recommendation should also include an explanation as to why that is the appropriate course of action supplement information presented during class. This particular assignment requires the student to (1) perform a simplified discounted cash flow (DCF) analysis of a capital investment, (2) identify uncertainties and risks that management should consider alongside the DCF analysis, and (3) make a recommendation as to whether management should proceed with the investment. Bullet points may be used in the second part of the assignment if the student believes that is an effective way to provide the information. Assignment Details Chapter 5 - Investment Decisions: Look Ahead and Reason Back - in Froeb, Luke M; McCann, Brian T.; Shor, Michael and Ward, Michael. Managerial Economics, 5th Edition, Cengage Learning, 2018, discusses cost of capital, compounding and discounting concepts, and net present value analysis. Students should use that information to assess the following capital investment: Superior Machining, Inc., a mid-size machining company, is considering an expansion of its product line. In order to do so, it must install new equipment at an expected cost of $2 million. Management is looking to fund the entire investment with equity, the providers of which expect a 14% return. Based on its experience with prior investments of the same type, management has developed the following estimates: Equipment Tax Year Operating Purchase Revenue Cost Depreciation 0 $2,000,000 $300,000 $200,000 14.3% 2 $600,000 $200,000 24.5% 3 $750,000 $200,000 17.5% $750,000 $200,000 12.5% 5 $750,000 $200,000 8.9% $750,000 $200,000 8.9% 7 $750,000 $200,000 8.9% $750,000 $200,000 4.5% $750,000 $200,000 10 $750,000 $200,000 JaWNO 4 6 8 9 The combined federal and state income tax rate for Superior is 26%. Note: Tax Depreciation is a non-cash charge, meaning that it can be deducted as expense when computing taxable income even though it does not represent an actual cash outlay. The first part of this assignment requires the student to perform a simple i 39F Mostly C The first part of this assignment requires the student to perform a simple discounted cash flow analysis to determine whether Superior should invest in the new equipment based on its net present value. The second part of the assignment requires the student to identify and explain as needed significant uncertainties and/or business risks that Superior's management team should also consider before making the investment. Assignment Details Chapter 5 - Investment Decisions: Look Ahead and Reason Back-In Froeb Luke M; McCann, Brian T:Shor, Michael and Ward, Michael Managerial Fconomics, 5 Edition, Cengage Learning 2018 discusses cost of capital compounding and discounting concepts, and net present valle analysis Students should use that information to assess the following capital Investment: . Superior Machining Inc, a mid-size machining company.is considering an expansion of its product line. In order to do se, it must install new equipment at an expected cost of $2 million Management is looking to fund the entire investment with equity, the providers of which expect a 14% return . Based on its experience with prior investments of the same type management has developed the following estimates Year Equipment Revenue Operating Tax Purchase Cost Depreciation 0 $2,000,000 1 $300,000 $200,000 10 2 $600,000 $200.000 24.5% $750,000 $200,000 175% 4 $750,000 $200,000 12.5% 5 $750,000 $200 000 89% $750,000 $200,000 8 7 $750,000 $200,000 899 $750,000 $200,000 LS $750,000 $200,000 10 $750,000 $200.000 3 6 9 The combined federal and state income tax rate for Superior is 26% Note: Tax Depreciation is a non-cash charge, meaning that it can be defected as expense when computing taxable income even though it does not represent an actual cash outley The first part of this assignment requires the student te perform a simple discounted cash flow analysis to determine whether Superior should invest in the new equipment based on its net present value The second part of the assignment requires the student to identify and explain as needed significant uncertainties and/or besiness risks that Superior's management team should also consider before making the investment In the third and final part of the assignment, the student should make a recommendation as to whether Superior should proceed with the Investment. The recommendation should also include an explanation as to why that is the appropriate course of action supplement information presented during class. This particular assignment requires the student to (1) perform a simplified discounted cash flow (DCF) analysis of a capital investment, (2) identify uncertainties and risks that management should consider alongside the DCF analysis, and (3) make a recommendation as to whether management should proceed with the investment. Bullet points may be used in the second part of the assignment if the student believes that is an effective way to provide the information. Assignment Details Chapter 5 - Investment Decisions: Look Ahead and Reason Back - in Froeb, Luke M; McCann, Brian T.; Shor, Michael and Ward, Michael. Managerial Economics, 5th Edition, Cengage Learning, 2018, discusses cost of capital, compounding and discounting concepts, and net present value analysis. Students should use that information to assess the following capital investment: Superior Machining, Inc., a mid-size machining company, is considering an expansion of its product line. In order to do so, it must install new equipment at an expected cost of $2 million. Management is looking to fund the entire investment with equity, the providers of which expect a 14% return. Based on its experience with prior investments of the same type, management has developed the following estimates: Equipment Tax Year Operating Purchase Revenue Cost Depreciation 0 $2,000,000 $300,000 $200,000 14.3% 2 $600,000 $200,000 24.5% 3 $750,000 $200,000 17.5% $750,000 $200,000 12.5% 5 $750,000 $200,000 8.9% $750,000 $200,000 8.9% 7 $750,000 $200,000 8.9% $750,000 $200,000 4.5% $750,000 $200,000 10 $750,000 $200,000 JaWNO 4 6 8 9 The combined federal and state income tax rate for Superior is 26%. Note: Tax Depreciation is a non-cash charge, meaning that it can be deducted as expense when computing taxable income even though it does not represent an actual cash outlay. The first part of this assignment requires the student to perform a simple i 39F Mostly C The first part of this assignment requires the student to perform a simple discounted cash flow analysis to determine whether Superior should invest in the new equipment based on its net present value. The second part of the assignment requires the student to identify and explain as needed significant uncertainties and/or business risks that Superior's management team should also consider before making the investment