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I need help with number 4-7. Required information Sacco Company has an opportunity to manufacture and sell a new product for a five-year period. The
I need help with number 4-7.
Required information Sacco Company has an opportunity to manufacture and sell a new product for a five-year period. The company estimated the following costs and revenues for the new product: Annual revenues and costs: When the project concludes in five years the working capital will be released for investment elsewhere in the company. Click here to download the Excel template, which you will use to answer the questions that follow. Click here for a brief tutorial on Goal Seek in Excel. 3. In the Excel template, using Goal Seek, calculate this investment's internal rate of return. If the company's hurdle rate is 18% would it pe likely to accept or reject the investment? Why? 4. What is the project's net present value when using a discount rate of 18% ? 5. If the company wants to achieve an 18% return on this investment, what is the maximum amount that it can spend each year on fixed put-of-pocket operating costs? Use Goal Seek to compute your answer. Note: The fixed out-of-pocket operating costs remain constant for all five years, therefore modifying cell C13 automatically updates cells D13 through G13. 5. If the investment in working capital increased from $110,000 to $130,000 would you expect the internal rate of return to increase, decrease, or stay the same? No computations are necessary to answer this question. 7. Refer to the original data. Using Goal Seek, calculate the internal rate of return if the investment in working capital increases from $110,000 to $130,000. Note: Be sure to return the fixed out-of-pocket operating costs to the original value of $(196,000)Step by Step Solution
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