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Hi can someone help me with this question? 4. (25 points) You are working for a company that is developing a new product. You have
Hi can someone help me with this question?
4. (25 points) You are working for a company that is developing a new product. You have been asked to put together an estimate of the 5 -year cashflow from this. Below is the pertinent information. You previously you did some work on Fully Allocated Costs (FAC) and have the following information. - Cost of Raw Materials is $3.54/ unit - Cost of Labor is $10.32 /unit - Overhead costs which has two parts: - $500,000 initial cost for machinery that can be depreciated using a 7 year MACRS recovery period (the machinery can be sold for $35,000 in year 5 ) - $350,000 per year for operating costs - The estimated volume is 18,000 units per year - Sales will grow at 5%/ year - The sales price will be S40/ unit - The tax rate is 28\% Payback 5. (5 points) What is the Payback for the investment in problem 4 ? Net Present Value 6. (5 points) What is Net Present Value (NPV) at 8% for the investment in problem 4 ? Is this a good investment? Internal Rate of Return 7. (5 points) What is the Internal Rate of Return (IRR) for the investment in problem 4 ? Is this a good investment at a MARR of 8% ? Sensitivity AnalysisStep by Step Solution
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