if someone able to provide correct answer i also have one project work for him will pay him individully for the project pls alse send me the anwer in word versis. to my ema..... if possible

Ullahsami320@yahoo.com

CASE STUDY.

Fruit-To-Go (FTG) processes fruit for shipping overseas.

FTG commissioned a study to look into the feasibility of changing the packaging of the fruit from cans to sealed bags. The Consultant charged $54,000 for the report.

The report concluded that the new packaging will increase sales and reduce some operating costs.

The new packaging machinery will cost $1,100,000. The new machine is expected to last 5 years. The Taxation Office advise the life of the machine, for tax purposes, is 4 years.

The old canning machinery was purchased 2 years ago for $800,000 and was being depreciated at $200,000 and will be for the next 2 years. The old machine could be sold today for $260,000. In 5 years it will be worth nothing.

Installing the new machine will require staff training (a tax deductible expense) of $35,000 before production can commence. Due to the lower cost of the bags Inventory required will be reduced by $80,000 for the life of the project.

The new sales of bagged fruit is expected to be $700,000 in Year 1 rising by 15% for 2 years then 0% for the rest of the life of the project. Variable Costs associated with the new packaged fruit are 50% of sales.

Canned fruit production will be discontinued. Sales of canned fruit were static at $450,000 with variable costs of $225,000 (50% of Sales).

The new equipment is very hi-tech. Maintenance costs are expected to be higher at $44,000 per year. Maintenance costs on the old machine were $30,000 per year.

The lighter packaging will reduce annual freight cost significantly from $250,000 to $100,000 per year.

Fixed costs are expected to remain at $320,000 per year.

At the end of the project the new machinery can be sold for $275,000.

Notes:

FTG will borrow the full Year 0 funds using a secured five-year interest-only loan at an interest rate of 10% per annum to finance the new equipment.

The company tax rate is 30%.

The required rate of return is 12.5%.

Requirement:

You are required to answer and to conduct a capital budgeting analysis of the company. You must determine:

1. The cash flows at the start 15Marks

2. The cash flows over the life 20Marks

3. The cash flows at the end 10 Marks

4. The appropriate discount rate 5 Marks

5. The NPV of the project 5Marks

6. The IRR of the project5Marks

7. The PI of the project5Marks

8. The payback of the project5Marks

9. A brief recommendation 5Marks

10. Please give short explanation on how to make investing decision. (about 500 words) 25Marks

1. 15Marks; > 13.5 HD; 12-13.5 D;10.5-12 C; 9-10.5 P; <9 F.

2-4 35 Marks; > 31.5 HD; 28-31.5 D;24.5-28 C; 21-24.5 P; <21 F.

5-10 50 Marks; > 45 HD; 40-45 D;35-40 C; 30-35 P; <30 F.

pls provide me full answer and contact me throw my email thanks