N A B C D E F G H I J K L M 1 Current Designs manufactures kayaks. Pedal Boats, Inc. has approached Current Designs about using its rotomold expertise and equipment to produce some pedal boat components for Pedal Boats Inc.. Current Designs is interested in exploring this opportunity, but is concerned that the pedal 3 boats are a different shape than the kayaks it currently produces. Current Designs would need to buy an additional rotomold oven in order to produce 4 the pedal boat components. This project clearly involves risks, and management wants to ensure the returns justify the risks. As an intern at Current Designs, you have been asked to prepare an initial evaluation of this proposal. To aid in your analysis, the following z information and assumptions have been provided. Present Value tables are include in the 2nd worksheet tab for your use. Enter labels, cell 8 references, formulas, and typed answers where indicated. $256,000 $8,000 1596 -Useful Life of the new rotomold oven in years -Depreciation Method -Projected Annual Net Income for this project Straight-Line $ 15,200 10 -Cost of the new rotomold oven 11 -Salvage Value of the new rotomold oven 12 -Discount Rate 13 14 1. Compute Annual Depreciation Expense. 15 Depreciable Cost 16 Estimated Life 17 Annual Depreciation Expense Formula Cell reference Formula 2. Compute Net Annual Cash Flows LABEL | LABEL Net Annual Cash Flows Cell Reference Cell Reference Formula 19 3. Compute the Payback Period. 20 LABEL 21 LABEL Cell Reference Cell Reference Formula years 5. Based on the Internal Rate of Return, would this project be acceptable? Explain. 23 4. What is the approximate Internal Rate of 24 Return of this project? Type Answer Type Answer 26 7. Based on your Net Present Value Analysis, would this project be acceptable? Explain. 27 6. Use the space below to create your own net present value analysis. Your analysis should 28 show all components used to compute net present value. In addition, you should, whenever 29 possible, incorporate formulas and cell references in your analysis. You do not have to use all 30 of the space provided. If you prefer, you can add an additional sheet to this file and create 31 your analysis there. Type Answer Cash Flow Present Value Discount Factor Type Cell reference Cell reference Value Value Formula Formula Formula 8. Change the tab name to Run 1 9. Copy the tab and name it Run 2 and update with the following information: Cost of the new rolomold oven $ 240,000 Projected Annual Net Income $ 23,910 Cell Reference Type Formula 10. Save the file and upload to blackboard by the due date N A B C D E F G H I J K L M 1 Current Designs manufactures kayaks. Pedal Boats, Inc. has approached Current Designs about using its rotomold expertise and equipment to produce some pedal boat components for Pedal Boats Inc.. Current Designs is interested in exploring this opportunity, but is concerned that the pedal 3 boats are a different shape than the kayaks it currently produces. Current Designs would need to buy an additional rotomold oven in order to produce 4 the pedal boat components. This project clearly involves risks, and management wants to ensure the returns justify the risks. As an intern at Current Designs, you have been asked to prepare an initial evaluation of this proposal. To aid in your analysis, the following z information and assumptions have been provided. Present Value tables are include in the 2nd worksheet tab for your use. Enter labels, cell 8 references, formulas, and typed answers where indicated. $256,000 $8,000 1596 -Useful Life of the new rotomold oven in years -Depreciation Method -Projected Annual Net Income for this project Straight-Line $ 15,200 10 -Cost of the new rotomold oven 11 -Salvage Value of the new rotomold oven 12 -Discount Rate 13 14 1. Compute Annual Depreciation Expense. 15 Depreciable Cost 16 Estimated Life 17 Annual Depreciation Expense Formula Cell reference Formula 2. Compute Net Annual Cash Flows LABEL | LABEL Net Annual Cash Flows Cell Reference Cell Reference Formula 19 3. Compute the Payback Period. 20 LABEL 21 LABEL Cell Reference Cell Reference Formula years 5. Based on the Internal Rate of Return, would this project be acceptable? Explain. 23 4. What is the approximate Internal Rate of 24 Return of this project? Type Answer Type Answer 26 7. Based on your Net Present Value Analysis, would this project be acceptable? Explain. 27 6. Use the space below to create your own net present value analysis. Your analysis should 28 show all components used to compute net present value. In addition, you should, whenever 29 possible, incorporate formulas and cell references in your analysis. You do not have to use all 30 of the space provided. If you prefer, you can add an additional sheet to this file and create 31 your analysis there. Type Answer Cash Flow Present Value Discount Factor Type Cell reference Cell reference Value Value Formula Formula Formula 8. Change the tab name to Run 1 9. Copy the tab and name it Run 2 and update with the following information: Cost of the new rolomold oven $ 240,000 Projected Annual Net Income $ 23,910 Cell Reference Type Formula 10. Save the file and upload to blackboard by the due date
