/C/Users/HP/Downloads/Assignment%20information%20(1).pdf Estimated material costs per tons in year 1 is $2,000 and this cost will increase by 3.5% every year. The farm will require about 6 workers working for 8 hours a day, 200 days per year. The pay rate is flat at $20/ how including superannuation. Annual operating fixed costs associated with production (excluding depreciation) are $100,000. Existing administrative costs are $550,000 per annum. As a result of the new operation, these administrative costs will increase by 30%. The company is subject to a tax rate of 30% on its profits Meanwhile, TDT Ltd is currently financed by 60% of equity and 40% of debt. Company's bond is traded a price of 5980. The bond has 10 year term, 8% coupon rate paid semi-annually and face value of $1.000 Ls addition, company's equity has a beta of 1.2 while the risk-free rate in the market is 3% and market portfolio return is estimated to be 12%. P. De Potato, the company CFO would like you to help him examine the viability of the project for the next five years, taking into account the projections of sales and operations costs prepared by company accountants e:///C:/Users/HP/Downloads/Assignment%20information%20(1).pdf P. De Potato, the company CFO would like you to help him examine the viability of the project for the next five years, taking into account the projections of sales and operations costs prepared by company's accountants. Your tasks: Based on the information in the case study, P. De Potato has asked you to write a report to TDT s management advising them as to the best course of action regarding this project. Your report should address the following specific questions asked by management: 1 Discuss which costs are relevant for the evaluation of this project and which costs are not. Your discussion should be justified by a valid argument and supported by references to appropriate sources 2. Determine the initial investment cash flow. 3. Estimate all operating cash flows associated with the project over 5 years. 4. Calculate the project's payback period Assuming the business could be sold at the end of the five years for $1 million Briefly comment on your results 5. Calculate the Net present value (NPV) of the project, assuming that the initial investment could be sold at the end of the five years for $1 million Briefly comment on your results and make appropriate 0 W * /HP/Downloads/Assignment%20information%20(1).pdf Your tasks: Based on the information in the case study. P. De Potato has asked you to write a report to TDT's management advising them as to the best course of action regarding this project. Your report should address the following specific questions asked by management: 1. Discuss which costs are relevant for the evaluation of this project and which costs are not. Your discussion should be justified by a valid argument and supported by references to appropriate sources 2. Determine the initial investment cash flow. 3. Estimate all operating cash flows associated with the project over 5 years. 4. Calculate the project's payback period. Assuming the business could be sold at the end of the five years for $1 million. Briefly comment on your results 5. Calculate the Net present value (NPV) of the project, assuming that the initial investment could be sold at the end of the five years for $1 million. Briefly comment on your results and make appropriate remarks on the assumptions made for these calculations if necessary. 6. Estimate the Internal rate of return (IRR) of the project. Briefly comment on your results 7. Using sensitivity analysis, recalculate NPV using the scenario of a A decrease in project sales by 10% annually b. An increase of the sale price by 5% annually c. An increase of material costs change from 3.5% to 8% Briefly comment on your results. 8. In view of your answer to Point 4 to point 7 above, advise TDT's management as to whether they should go ahead with the investment project In your recommendations you may wish to suggest possible refinements in the method used for evaluating this project Hi * /C/Users/HP/Downloads/Assignment%20information%20(1).pdf Estimated material costs per tons in year 1 is $2,000 and this cost will increase by 3.5% every year. The farm will require about 6 workers working for 8 hours a day, 200 days per year. The pay rate is flat at $20/ how including superannuation. Annual operating fixed costs associated with production (excluding depreciation) are $100,000. Existing administrative costs are $550,000 per annum. As a result of the new operation, these administrative costs will increase by 30%. The company is subject to a tax rate of 30% on its profits Meanwhile, TDT Ltd is currently financed by 60% of equity and 40% of debt. Company's bond is traded a price of 5980. The bond has 10 year term, 8% coupon rate paid semi-annually and face value of $1.000 Ls addition, company's equity has a beta of 1.2 while the risk-free rate in the market is 3% and market portfolio return is estimated to be 12%. P. De Potato, the company CFO would like you to help him examine the viability of the project for the next five years, taking into account the projections of sales and operations costs prepared by company accountants e:///C:/Users/HP/Downloads/Assignment%20information%20(1).pdf P. De Potato, the company CFO would like you to help him examine the viability of the project for the next five years, taking into account the projections of sales and operations costs prepared by company's accountants. Your tasks: Based on the information in the case study, P. De Potato has asked you to write a report to TDT s management advising them as to the best course of action regarding this project. Your report should address the following specific questions asked by management: 1 Discuss which costs are relevant for the evaluation of this project and which costs are not. Your discussion should be justified by a valid argument and supported by references to appropriate sources 2. Determine the initial investment cash flow. 3. Estimate all operating cash flows associated with the project over 5 years. 4. Calculate the project's payback period Assuming the business could be sold at the end of the five years for $1 million Briefly comment on your results 5. Calculate the Net present value (NPV) of the project, assuming that the initial investment could be sold at the end of the five years for $1 million Briefly comment on your results and make appropriate 0 W * /HP/Downloads/Assignment%20information%20(1).pdf Your tasks: Based on the information in the case study. P. De Potato has asked you to write a report to TDT's management advising them as to the best course of action regarding this project. Your report should address the following specific questions asked by management: 1. Discuss which costs are relevant for the evaluation of this project and which costs are not. Your discussion should be justified by a valid argument and supported by references to appropriate sources 2. Determine the initial investment cash flow. 3. Estimate all operating cash flows associated with the project over 5 years. 4. Calculate the project's payback period. Assuming the business could be sold at the end of the five years for $1 million. Briefly comment on your results 5. Calculate the Net present value (NPV) of the project, assuming that the initial investment could be sold at the end of the five years for $1 million. Briefly comment on your results and make appropriate remarks on the assumptions made for these calculations if necessary. 6. Estimate the Internal rate of return (IRR) of the project. Briefly comment on your results 7. Using sensitivity analysis, recalculate NPV using the scenario of a A decrease in project sales by 10% annually b. An increase of the sale price by 5% annually c. An increase of material costs change from 3.5% to 8% Briefly comment on your results. 8. In view of your answer to Point 4 to point 7 above, advise TDT's management as to whether they should go ahead with the investment project In your recommendations you may wish to suggest possible refinements in the method used for evaluating this project Hi *