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Could someone do each part so that I can compare mine to yours? and a short/breif explantaion of the importance of doing each part, why
Could someone do each part so that I can compare mine to yours? and a short/breif explantaion of the importance of doing each part, why we need to do each part? what does it tell you? and how will it help us? (Just to so I can ground my understanding) Thank you!
Dunnill Industries Ltd. is in the business of making polyethylene pellets. These pellets are used as the building blocks for numerous consumer and industrial products around the world, especially in the manufacturing of packaging and plastic bottles. World demand ent is thinking abou for these products has been increasing and senior managem expanding their existing business. For this reason, the President of the firm (Steven) wants you to do a financial analysis on this incremental project. The firm has the land but needs to invest into a new fired heater. A large industrial heater s used in the conversion ofethylene gas molecules into long polymer chains that result in the manufacturing of synthesized polyethylene The President ex 200,000 for the first year and to increase two percen per year (2%) for each year thereafter. The heater under consideration will cost $4,000,000 and this price includes shipping to the site. However, the firm estimates that it wilTcos an additional s850,000 for site preparation including a foundation) and to install the plumbing, electrical and the electronic controls to bring into line the new heater to the existing plant. For the first ar of operation, the heater will have annual fuel costs ofS800,000 and nance will be an additional $410,000 per year. These costs are expected to increase mainte by 5 percent per year (after the first year) to the end of the useful life of the asset, which is expected to be 10 years and will have a salvage value of $100,000. (The salvage value snet of any dismantling costs) The heater comes under class 6, which has a CCA rate of 10 percent The firm's margina e is 22 percent and the firm's discount rate (MARR) is 12 percent. The firm will need $300,000 for working capital (additional parts) and expects to recoup $50,000 of this amount at the end of the project. The heater qualifies for a $100,000 ITC and will be realized in the first year of operation. (Year 1) For this project, the firm will borrow $1,000,000 at 4 percent compounded annually for 0 years and the bank has agreed to accept payments at the end of each year The President is very excited about this potential new project and would like you to construct a financial Cost/Benefit analysi outlining the benefits and costs of installing this fired heater Based on this information, the President wants you to prepare the following items in a report 1) Abrief Executive Summary outlining the results of your anal 2 marks) 2) A Table showing the amortization schedule of the loan over the 10-year period (5 marks) 3) A Table showing the Capital Cost Allowance and Undepreciated Capital Cost Allowance over the life of the asset of 10 years. (2 marks) 4) Aspreadsheet showing the following details under the following assumptions: A projected Incremental Income Statement over a 10-year period. C10 marks) A projected cash flow statement from the projections in part (a) (15 marks) c) The net present value of the after-tax cash flows (2 marks) Using the results you got in your analysis, explain in "layman d) language" what the net present value means in terms of value to the company. (4 marks) e) The Payback period of this incremental project (2 marks) Calculate the internal rate of return on this project. (4 marks)Step by Step Solution
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