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Perform a financial analysis using excel and show your work. Need to show NPV and IRR is a must. Compute Net Cash Flow from the
Perform a financial analysis using excel and show your work. Need to show NPV and IRR is a must. Compute Net Cash Flow from the Project
FRONT-END LOADER PROJECT PC would have to build a new factory to manufacture front-end loaders. The facility would have capacity to produce 10,000 units per year. The cost of the land would be $1.5 million, and the building would cost $5.5 million. Equipment costing $10 million would also be needed. It was expected that the building and equipment would be either worn out or obsolete within 15 years, at which time the company would reconsider its options relating to this product line. It was estimated that, at the end of the project's life, the land would be worth $3 llion, the building $500,000 and the equipment $400,000 in today's dollars The building and equipment would have minimal salvage value due to their highly specialized nature. The building would be subject to a capital cost allowance (CCA) rate of 10 per cent and the equipment, a CCA rate of 30 per cent. For tax purposes, the building was amortized separately in its own pool. The equipment was a busy class with numerous asset sales and purchases throughout the year In addition to property, plant and equipment, additional net working capital (NWC) would be required, which would vary with sales. The NWC turnover ratio for this new operation was expected to be 6:1 Sales were estimated to be 2,850 units in the first year, but were expected to grow at approximately 20 per cent per year for the first five years before leveling out to three per cent growth as the company reached maximum market penetration. Sales of front-end loaders were seasonal and were expected to follow the following pattern anuary- March April - June uly - September October-December 20% 40% 30% | 10%Step by Step Solution
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