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Please answer with excel formulas! Forcefully Delicious Cookies has decided to offer Moms SUPER special Cookies. I had market research done that cost me $7.5k
Please answer with excel formulas!
Forcefully Delicious Cookies has decided to offer Moms SUPER special Cookies. I had market research done that cost me $7.5k and, but the results were fantastic. FDC thinks that the new cookie will generate $250,000 in sales per year in year 1, and sales will increase 10% a year. Fixed costs will be $18,000 per year, and variable costs will be approximately 30% of sales. The additional capital investment in the kitchen equipment (that will be capitalized) needed to produce the new cookies will cost $255,000 and will be depreciated in a straight-line manner for the 4 years of the cookies life assume no salvage value. | ||
And, now we have working capital to think about- | ||
INVENTORY in Year 0 is $20k, in Year 1 inventory value is $30k, in Year 2 the value of inventory remains constant at $30k, in Year 3 inventory is $15k, and finally in Year 4 you have no inventory remailing. | ||
ACCOUNTS RECEIEVABLE Year 1 value of AR is $2k, Year 2 AR value is $7K, Year 3 AR value is 5k, and year 4 AR is 0. | ||
ACCOUNTS PAYABLE- Year zero value is $3.5k, year 1 value is $1k, Year 2-4 value is zero | ||
The new cookie investment is an extension of FDCs current business and has a similar risk/reward profile to the firm as a whole. | ||
What are the cash flows and the NPV- SHOW ME ALL YOUR WORK- (you get points for laying this out as detailed below) | ||
Please lay out the cash flows for every relevant year in detail. Show me the individual components for each type of cash flow for each year. You get credit for the layout for each of the three types of cash flow and NPV calculation as listed below. | ||
Cash Flow from Investing in Fixed Assets | ||
Cash Flow from Changes in Net Working Capital | ||
Cash Flow from Operations | ||
Then show me your calculations to compute an NPV- what is your discount rate? | ||
QUESTION-What is the IRR? | ||
QUESTION- What is the NPV | ||
QUESTION- ACCEPT OR REJECT THIS INVESTMENT? | ||
QUESTION- if this investment were riskier than FDC's overall business as a whole what would happened to the NPV? | ||
QUESTION- at what WACC would you reject the project? |
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