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Need Help ASAP. 'ou are Executive Vice President of Operations of a company that produces and distributes household goods. 'our company manufactures some of its
Need Help ASAP.
'ou are Executive Vice President of Operations of a company that produces and distributes household goods. 'our company manufactures some of its products and purchases and resells other products. 'our company has been distributing brushes purchased from a third-party and you are analyzing the economics of insourcing (manufacturing internally) the supply. hese are the facts that you need to incorporate into a model: Your company has been spending $200,000 annually to purchase brushes. This expense will cease if supply of brushes is insourced. You estimate that manufacturing inhouse will cost $100,000 in labor and $10,000 in overhead. A significant investment in equipment will be required and the investment will be straight-line depreciated over a 5 year useful life (no residual value). Additional work needs to be done to firm up an estimate but you believe the equipment will cost between $200,000 and $350,000. The Treasurer of your company needs to decide how the investment would be financed and has asked you to analyze the sensitivity of the return to financing options. At the end of the previous year, 2022, your company had $200,000 in Cash, zero debt, and $100,000 in Equity on its Balance Sheet. or the purpose of developing the model, you have selected some initial values for the two independent variables. 'ou are responsible for developing a model that analyzes the potential investment, providing valuations of alternate strategies and a sensitivity analysis of the results. he following model should include only the incremental impact on the Income Statement, Balance Sheet and Cash Flow Statement. Please enter formula in the yellow boxes below to develop the model. Cash Flow Statement Net Income Depreciation Cash Flow from Operations CapEx Cash Flow from Investing Issues (Retirement) Debt Cash Flow from Financing Cash Generated Net Income from the Income Statement Investment Required spread of the useful life ( 5 years) Debt based on Percent Debt Financed with 1/5th retired each year. Must be a forn Write a fomula that calculates the Net Present Value (NPV) of the cash flows in Row 63 using a 10% discount factor. Change the 'Investment Required', cell D28, to $200,000 and enter the resulting NPV value (not the formula) in the yellow box below. Keeping the $200,000 'Investment Required' change the 'Percent Debt Financed' to 0% and enter the resulting NPV value (not the formula) in the yellow box belowStep by Step Solution
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