Question
Forcefully Delicious Cookies has decided to offer Moms SUPER special Cookies. I could just sell the recipe itself for $5k. FDC thinks that the new
Forcefully Delicious Cookies has decided to offer Moms SUPER special Cookies. I could just sell the recipe itself for $5k. FDC thinks that the new cookie will generate $200,000 in incremental sales per year in year 1, and sales will increase 10% a year. Fixed costs will be $15,000 per year, and variable costs will be approximately 30% of sales. The additional capital investment in the kitchen equipment (that will be capitalized) needed to produce the new cookies will cost $200,000 and will be depreciated in a straight-line manner for the 4 years of the cookies life assume no salvage value.
1.What are the cash flows and the NPV- (on excel)
2.What is the IRR?
3.What is the NPV
4.ACCEPT OR REJECT THIS INVESTMENT?
5.at what WACC would you reject the project?
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