Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please add excel formulas UI puicising the air-conditioning system if the discount rate is 12% and corporate tax rate is 35%? 9. (Cash-flow analysis) The

image text in transcribed
image text in transcribed
please add excel formulas
UI puicising the air-conditioning system if the discount rate is 12% and corporate tax rate is 35%? 9. (Cash-flow analysis) The Cold and Sweet" (C&S) company manufact ice cream bars. The company is considering the purchase of a new machin that will top the bar with high-quality chocolate. The cost of the machine $900,000. The machine will be depreciated over 10 years to zero salvage value. However, the company intends to use the machine for only 5 years Management thinks that the sale price of the machine at the end of 5 years will be $100,000. The machine can produce up to 1 million ice cream bars annually. The marketing director of C&S believes that if the company will spend $30,000 on advertising in the first year and another $10,000 in each of the following years, the company will be able to sell 600,000 bars for $1.30 each. The cost of producing each bar is $0.50, and other costs related to the new products are $40,000 annually. C&S's cost of capital is 14%, and the corporate tax rate is 30%. a. What are the capital gains/losses from selling the machine after 5 years? b. What is the NPV of the project if the marketing director's projec- tions are correct? c. What is the minimum price that the company should charge for each bar if the project is to be profitable? Assume that the price of the bar does not affect sales. d. The C&S Marketing Vice President suggested canceling the adver- tising campaign. In his opinion, the company sales will not be reduced significantly due to the cancellation. What is the minimum CHAPTER 6 Capital Budgeting Valuing Business Cash Flow 215 e. quantity that the company needs to sell in order to be profitable if the Vice President's suggestion is accepted? The Marketing Vice President would like some sensitivity analysis done. He asks, "What would be the NPV of the project if annual unit sales vary from 400,000, 450,000, ..., 900,000 and if the unit price per bar varies from $1.20, $1.30, ..., $1.70?" Show the Data Table that answers his

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Project Financing Analyzing And Structuring Projects

Authors: Frank J Fabozzi, Carmel De Nahlik

1st Edition

9811232393, 9789811232398

More Books

Students also viewed these Finance questions

Question

When should you avoid using exhaust brake select all that apply

Answered: 1 week ago

Question

How is social networking used in informal training?

Answered: 1 week ago

Question

What are some career development methods?

Answered: 1 week ago