Question
KKCORPORATION, INC. is a pharmaceutical company in Paris and has plans to release a vitamin supplement product due to high demand during the pandemic. In
KKCORPORATION, INC. is a pharmaceutical company in Paris and has plans to release a vitamin supplement product due to high demand during the pandemic. In the product launching, the first year production is 2,000 units, then the company is projected to increase its production quantity by (25 + X)% in the second year, and (30 + Y)% in the third year. The selling price of vitamins is Rp30.000 per unit. The cost involved in producing vitamins include:
Variable cost per unit is estimated at 70% of the selling price
Fixed costs are Rp16.500.000
Purchase price and machine installation Rp4.200.000
Initial net working capital is Rp8.000.000
Annual net working capital for the following year is 15% of projected sales
This equipment will last for three years and depreciated using straight-line method. Within three years, this equipment could be sold for about 10% of its cost. Assumed tax rate is 25%.
Question:
a. Calculate the projected cash flow (OCF, Change in NWC, and Change in NCS).
b. Calculate the NPV if r = 25%
c. Is the project acceptable?
*Notes regarding the use of X and Y values Suppose there is a value = (25 + X)%. If your X value is 5, then the X value can be substituted for your X value, so that (25 + 5)% = 30%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started