Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

how do i calculate the NPV, IRR, and profitability index using this information? . . Ma & Pa Incorporated Expense Estimates (FIN_300) Please note: The

how do i calculate the NPV, IRR, and profitability index using this information?

image text in transcribed

. . Ma & Pa Incorporated Expense Estimates (FIN_300) Please note: The data below is based on Andre's original request of examination of an eight year project. You will use these numbers to answer a. thru e. on the Ma & Pa Worksheet." Up-front costs: Andre Russell worked with the top management (Bill, Ley. Lilian, and Hillary) as well as selected middle manager to arrive at the up-front costs. Based on his discussions with them, he is anticipating the up-front costs to be comprised of the following: Cost of the land: He anticipates that the land will cost about $40,000 per aere and he needs about 5 acres ($200,000 in total, Cost of the building: $1.000.000 Equipment: $250,000 Furniture: $200,000 IT infrastructure: $550.0XX) Total projected up front costs: S2.200,000 II. Cost of capital: Andre researched extensively on cost of capital and found: Total projected cost of capital: $195,000 III. Sales: After working with Elizabeth Brown, Director of Sales and Marketing, and several other managers in her arca, Andre is projecting the following sales for the first year lurther, these sales are expected to grow at 10% compounded for the duration of the project Electronic toys for children: $175.000 Halloween toys: $320,000 Christmas toys: $430,000 Total projected sales: S925,000 IV. Cash expenses. Based on the past expenses and projections for future expenses, Andre arrived at the following expenses on an annual basis. For simplicity, Andreassumed that these expenses will grow at 2% annually for the duration of the project Labor/Employment Expenses: 587.300 Maintenance: $77,500 New equipment: $75,000 IT budget: $70,000 Total projected cash expense: 8310,000 V. Depreciation: Andre is expecting that the depreciation will computed as follows: Land value depreciation: 870.000 Building value depreciation: $65.000 Equipment depreciation: 560,000 IT infrastructure depreciation $55,000 Total projected depreciation: $250,000 . . . Ma & Pa Incorporated Expense Estimates (FIN_300) Please note: The data below is based on Andre's original request of examination of an eight year project. You will use these numbers to answer a. thru e. on the Ma & Pa Worksheet." Up-front costs: Andre Russell worked with the top management (Bill, Ley. Lilian, and Hillary) as well as selected middle manager to arrive at the up-front costs. Based on his discussions with them, he is anticipating the up-front costs to be comprised of the following: Cost of the land: He anticipates that the land will cost about $40,000 per aere and he needs about 5 acres ($200,000 in total, Cost of the building: $1.000.000 Equipment: $250,000 Furniture: $200,000 IT infrastructure: $550.0XX) Total projected up front costs: S2.200,000 II. Cost of capital: Andre researched extensively on cost of capital and found: Total projected cost of capital: $195,000 III. Sales: After working with Elizabeth Brown, Director of Sales and Marketing, and several other managers in her arca, Andre is projecting the following sales for the first year lurther, these sales are expected to grow at 10% compounded for the duration of the project Electronic toys for children: $175.000 Halloween toys: $320,000 Christmas toys: $430,000 Total projected sales: S925,000 IV. Cash expenses. Based on the past expenses and projections for future expenses, Andre arrived at the following expenses on an annual basis. For simplicity, Andreassumed that these expenses will grow at 2% annually for the duration of the project Labor/Employment Expenses: 587.300 Maintenance: $77,500 New equipment: $75,000 IT budget: $70,000 Total projected cash expense: 8310,000 V. Depreciation: Andre is expecting that the depreciation will computed as follows: Land value depreciation: 870.000 Building value depreciation: $65.000 Equipment depreciation: 560,000 IT infrastructure depreciation $55,000 Total projected depreciation: $250,000

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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