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Please do it in excel Lenovo Ltd is planning to rent a factory on a four-year lease contract in China from 1 January 2014 to

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Please do it in excel

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Lenovo Ltd is planning to rent a factory on a four-year lease contract in China from 1 January 2014 to 2017, which will be used to produce a new laptop (model code-DL-GS8). Since the senior management is worried about the sustainability of the new plant, they have decided to assess the new product for the upcoming four years' manufacturing and sales life. Under the lease, Lenovo Ltd will pay $100,000 annually in advance on 1 January The plant is expected to cost $600,000. This will be bought and paid for on 1 January 2014 and is expected to be scrapped with zero proceeds on 31 December 2017. The company is currently using straight-line method at 25% to depreciate all their fixed assets, and they have no intention to change this. Each unit of DL-GS8 is estimated to give rise to a variable labour cost of $200 and a variable material cost of $100. DL-GS8 manufacture will be charged with an annual share of the business's administrative costs, totalling about $15,000 a year. The manufacture and sales of DL-GS8 are expected to increase the total administrative costs by $90,000 each year. The following are estimated manufacture and sales numbers of DL-GS8 for the next four years are 400 units in 2014, 600units in 2015, 500units in 2016, 200units in 2017. The estimated selling price of DL-GS8 is $1400. The business will need to support the manufacture and sales of the product with working capital. This has been estimated at amount equivalent to $100 for each unit of the product sold every year. The working capital needs to be in place by the beginning of the relevant year of production, and sales and reduced to zero at the end of 2017. The business's accounting year end is 31 Dec. The management has decided to use a discount rate of 15%, after accessed given risk involved. You are required to: A) Identify the annual net relevant cash flows and use this information to assess the project on a net present value basis at 1 Jan 2014. B) Estimate the internal rate of return of the project. Lenovo Ltd is planning to rent a factory on a four-year lease contract in China from 1 ruary 2014 to 2017, which will be used to produce a new laptop model code-DL-GSB). Since the senior management is worried about the sustainability of the new plant, they have decided to assess the new product for the upcoming four years' manufacturing and sales life. Under the lease, Lenovo Ltd will pay $100.000 annually in advance on 1 January The plant is expected to cost $600,000. This will be bought and paid for on 1 January 2014 and is expected to be scrapped with were proceeds on 31 December 2017 The company is currently using straight-line method at 25% to depreciate all their fixed assets, and they have no intention to change Each unit of DL-GS8 is estimated to give rise to a variable labour cost of $200 and a variable material cost of $100. The manufacture and sales of DL-GS8 are expected to increase the total administrative posts by $90,000 each year The following are estimated manufacture and sales numbers of DL-GS8 for the next four years are 400, 600, 500, and 200 units from 2014 to 2017. The estimated selling price for DL-GSS is $1,400 each The business will need to support the manufacture and sales of the product with working capital. This has been estimated at amount equivalent to $100 for each unit of the product sold every year The working capital needs to be in place by the beginning of the relevant year of production, and sales and reduced to rere at the end of 2017 The business's accounting year end is 31 Des. The management has decided to use a discount rate of 15%, after accessed given risk involved You are required to: Al Identify the annual net relevant cash flows and use this information to assess the project on a net present value basis at B) Estimate the internal rate of return of the project. 2014

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