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i need help with 1 and 2. thank you! D. Morgan of SparkPlug Incorporated has been approached to take over a production facility from B.R.
i need help with 1 and 2. thank you!
D. Morgan of SparkPlug Incorporated has been approached to take over a production facility from B.R. Machine Company The acquisition will cost $1,810,000, and the after-tax net cash inflows will be $333,000 per year for 12 years SparkPlug currently uses 12% as its after-tax cost of capital. Tom Morgan, production manager, is very much in favor of the investment. He argues that the total after-tax net cash inflows is more than the cost of the investment, even if the demand for the product is somewhat uncertain. "The project will pay for itself even if the demand is only haif the projected level." Cindy Morgan (corporate controller) believes that the cost of capital should be 15% because of the declining demand for SparkPlug products Required: 1. What is the estimated NPV of the project if the after-tax cost of capital (discount rate) is 12\%? Use the bult-in NPV function in Excel. (Negative amounts should be indicated by a minus sign. Round your answer to the nearest whole dollar amount.) 2. What is the estimated NPV of the project if the after-tax cost of capital (discount rate) is 15% Use the bultt-in NPV function in Excel. (Negative amounts should be indicated by a minus sign. Round your answer to the nearest whole dollar amount.) 3. Use the built-in function in Excel to estimate the project's IRR. (Round your answer to 1 decimal places.) 4. Do a sensitivity analysis by using GOAL SEEK to determine, given estimated cash inflows, the original investment outiay that would result in an IRR of 15%. (Round your answer to nearest whole dollar amount.) Step by Step Solution
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