Han shi case group project mba $702$

following four years will be $$28$ million, $$37$ million, $$40$ million, and $$43$ million. Because variable new plant will be more efficient than LSUS corporation's current manufacturing facilities, The new costs are expected to be $65$ percent of sales, and fixed costs will be $$2\mathrm{.}4$ million per yext year. plant will also require net working capital amounting to $8$ percent of sales for the next

Han realizes that sales from the new plant will continue into the indefinite future. Because of this, he believes the cash flows after Year $5$ will continue to grow at $2\mathrm{.}5$ percent indefinitely. The company's tax rate is $40$ percent and the required return is $12$ percent.

Jessica is not sure about the capital budgeting technique and want like Han to elaborate clearly what are and are not important elements to engage the capital budgeting decision for the LSUS corporation.

Jessica is recommended to use profitability index, NPV$,$ and IRR, she wants Han to examine extensively the benefits and drawbacks of each approach.

After the examine of three approaches, Jessica would like Han to analyze the financial viability of the new plant and calculate the profitability index, NPV$,$ and IRR.

After the empirical results, Han would like to provide the recommendation to Jessica and Board of directors, what is Han's recommendation? Jessica also wants Han to provide a

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sensitivity analysis and change any one of elements documented before and see what happens? For example, increase or decrease growth rate and at what level the firm can break even when $NPV=0.$

Jessica has instructed Han to disregard the value of the land that new plant will require. LSUS Corporation already owns it$,$ and a practical matter, it will simply go unused indefinitely. She has asked Han to discuss this issue in his report.B