Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

fou have been hired as a financial consultant by PJ corporation. PJ is considering investing in a new machine to produce dog biscuits. PJ has

image text in transcribed
fou have been hired as a financial consultant by PJ corporation. PJ is considering investing in a new machine to produce dog biscuits. PJ has provided you with the following information: Full price of machine is $100,000. The machine will not require any modification or increase in net working capital. PJ has a 30% marginal tax rate. The machine falls into the MACRS 3-year clad PJ will use the machine for 4 years and then plans to sell it for $15,000 at the end of year 4. The machine is expected to increase earnings before depreciation by $35,000 a year for the life of the machine. PJ has a WACC of 12%. You have been hired by PJ to create a spreadsheet that can be used by the PJ managers to assist thenm in making the investment decision and will calculate the NPV of the project. The spreadsheet should be set up to allow for sensitivity analysis to be conducted. The cells to input the full price, tax rate, increased earnings, sale price in year 4, and WACC should be easily identified and allow the PJ managers to change their values. Your name should be on the sheet and it should print out as 1 page. Additionally, you are to create a 2-page executive summary with your decision recommendation in MS-Word. The executive summary should explain in words what the spreadsheet is showing in regards to your

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

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