Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cost of new plant and equipment: $ 20,900,000 Shipping and installation cost: $ 300,000 Unit Sales: Year Unit sold 1 100,000 2 130,000 3 160,000

image text in transcribed
Cost of new plant and equipment: $ 20,900,000 Shipping and installation cost: $ 300,000 Unit Sales: Year Unit sold 1 100,000 2 130,000 3 160,000 4 100,000 5 60,000 Sales price per unit: $500/unit in years 1-4, $380/unit in year 5 Variable cost per unit: $260/unit Annual fixed costs: $ 300,000 Net Working Capital (NWC) Requirement: There will be an initial working capital requirement of S 500,000 just to get production started. Then, additional net working capital investment each year equal to 7% of the dollar value of sales for that year. Finally, 90% of net working capital will be liquidated at the termination of the project at the end of year 5. The Depretiation Method: Seven-year MARCS percentage will be used. It is assumed that the plan. In five year, this equipment can be sold for about 20% of its acquisition cost.. Assume that the tax rate is 35% and the required return is 25%. PART 2: Please answer and submit the following question as pdf. Make sure that your hand writing is readable and do not forget to write your name, your department and your signature at the end of your answer sheets. 1-Use all of the information given / calculated in section one and via calculator calculate the questions given below. As a financial manager for each section discuss whether the project is acceptable or not. a) Apply the Net Present Value and comment on your result. b) Apply the Internal Rate of Return and comment on your result. c) Apply the Payback Period and comment on your result. (Assume that preset time is 5 years) d) Apply the Discounted Payback Period and comment on your result. (Assume that preset time is 5 years) e) Apply the Profitability Index and comment on your result. f) Which technique is best and why

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_2

Step: 3

blur-text-image_step3

Ace Your Homework with AI

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

Get Started

Students also viewed these Finance questions

Question

5. This question is about disjoint set. (20%) G H M T S Z W

Answered: 1 week ago