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need the excell table The Lake Charles Chemicals LLC is considering investing in a new gas to liquids technology developed by McNeese Students and Faculty
need the excell table
The Lake Charles Chemicals LLC is considering investing in a new gas to liquids technology developed by McNeese Students and Faculty through their R&D. McNeese requires the company to pay a Royalty fees of $0.05/gallon of liquids once the company starts its operations. The following financial information is presented for management review. Capital investment: $3 million at the beginning of year 1. This investment consists of $0.5 million in a building and $2.5 million in plant equipment. Financing: The company also borrowed $2.5 million from a national bank at 10% interest at the beginning of year 1. Depreciation method: The building and the plant equipment is depreciated based on declining balance method at a depreciation rate of 150% Project life: 20 years after two-year of plant construction. Salvage value: $50,000 for the equipment and $600,000 for the building Total Sales: Production capacity is 5000 gal/day of methanol at a selling price of $0.80/gallon. Accounting for plant startup and shutdowns, on an average the plant will run for 330 days/year. Out-of-pocket expenditures: 10% of annual sales from year 3. Working Capital: $500,000 required at beginning of year 3. Marginal tax rate: 40% a) Determine the net after-tax cash flows over the project life b) Determine the IRR for this investment c) Determine the Present worth and equivalent annual worth for the investment at MARR = 25% The Lake Charles Chemicals LLC is considering investing in a new gas to liquids technology developed by McNeese Students and Faculty through their R&D. McNeese requires the company to pay a Royalty fees of $0.05/gallon of liquids once the company starts its operations. The following financial information is presented for management review. Capital investment: $3 million at the beginning of year 1. This investment consists of $0.5 million in a building and $2.5 million in plant equipment. Financing: The company also borrowed $2.5 million from a national bank at 10% interest at the beginning of year 1. Depreciation method: The building and the plant equipment is depreciated based on declining balance method at a depreciation rate of 150% Project life: 20 years after two-year of plant construction. Salvage value: $50,000 for the equipment and $600,000 for the building Total Sales: Production capacity is 5000 gal/day of methanol at a selling price of $0.80/gallon. Accounting for plant startup and shutdowns, on an average the plant will run for 330 days/year. Out-of-pocket expenditures: 10% of annual sales from year 3. Working Capital: $500,000 required at beginning of year 3. Marginal tax rate: 40% a) Determine the net after-tax cash flows over the project life b) Determine the IRR for this investment c) Determine the Present worth and equivalent annual worth for the investment at MARR = 25% Step by Step Solution
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