Question
Capital Project Analysis Capital Project Analysis Inputs Base Case Scenario (50%) Worst Case (25%) Best Case (25%) Equipment Cost $ 2,000,000.00 Equipment Setup Cost $
| Capital Project Analysis | Capital Project Analysis | ||
| Inputs | Base Case Scenario (50%) | Worst Case (25%) | Best Case (25%) |
| Equipment Cost | $ 2,000,000.00 | ||
| Equipment Setup Cost | $ 300,000.00 | ||
| Years of Operation | 5.00 | ||
| Projected Unit Sales Yr 1 | 25,000.00 | ||
| Projected Price Yr 1 | $ 100.00 | ||
| Variable Costs/Unit for Yr 1 | $ 60.00 | ||
| Fixed Costs for Yr 1 | $ 500,000.00 | ||
| NOWC as % of sales | 10.00% | ||
| Projected Unit Sales Growth Per Year | 5.00% | 0% | 20% |
| Equipment Salvage Value | 600,000.00 | ||
| Inflation of unit price | 3.00% | 1% | 5% |
| Inflation of VC/unit | 5.00% | ||
| Inflation of Fixed Costs | 6.00% | ||
| Depreciation Method | MACRS 7 | ||
| Tax Rate | 35.00% | ||
| WACC | 10.00% | Using the provided information students must calculate the appropriate class flows associated with the project. These include: 1) cash flows from fixed assets; 2) cash flows from changes to operating capital; and 3) cash flows from operations. After calculating the base case NPV, the next step is to calculate the changes to cash flows and net present value for the worst case and best case scenarios. The overall expected NPV can then be estimated using the assumption of a 50% likelihood of the base case, 25% likelihood of the worst case, and 25% likelihood of the best case occurring. |
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
The Making Of Finance
Authors: Isabelle Chambost, Marc Lenglet, Yamina Tadjeddine
1st Edition
1138498572, 978-1138498570
