Question
Lets assume that you are a financial analyst of MG Corp, a candy corporation. The company is studying the possibility of buying a new manufacturing
Lets assume that you are a financial analyst of MG Corp, a candy corporation. The company is studying the possibility of buying a new manufacturing machine for a new line of candy. The CEO of MG Corp asks your technical opinion: if the project should be approved or not. The lifetime of the machine is 10 years. The cost of buying the machine is $900,000. An initial investment in inventory of $100,000 is required The machine is expected to produce 100,000 units per year The sale price per unit of candy is $3 The variable cost per unit of candy is $1 The fixed operational costs are $50,000 The depreciation of the machine is 10% each year The corporate tax is 40% The Weighted Average Cost of Capital (WACC) is 10% At the end of the final year the machine is sold in the market in $200,000 Based on this information, construct in an Excel file the Cash Flow Table for this project. In addition, compute the Net Present Value (NPV) and the Internal Rate of Return (IRR) in the same page and indicate if this project should be approved or rejected
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