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please help me with this question as soon as possible Quantitative Problemt Sunahine Smoothies Company (SSC) manufoctures and distributes smoothies, 5SC is considering the developenent
please help me with this question as soon as possible
Quantitative Problemt Sunahine Smoothies Company (SSC) manufoctures and distributes smoothies, 5SC is considering the developenent of a new line of high-protein energy smoothies ssC's Cro hes collected the following informatien regarding the proposed project, which is enpected to last 3 years - The project can be opented at the company's Charleston plant, which is currently vacant. - The project will require that the company spend 54 milion today (t=0) to purchase addational equipment. Thls equipment is elig ble for 100% bonus depreciation, so the equipment is fully deprecated at the time of its purchase. The company plans to use the equipment for all 3 years of the project. At t=3 (which is the project's last year of operation), the equipment is expected to be sold for $1,200,000 before taxes. - The project will require an increase in ant operating working capital of $730,000 at t=0. The cost of the working capital will be fully recevered at t=3 (which is the propect's last year of eperation). - Expected highiprotein energy smoothie sales are as follows: Yrat Sales 12332,200,0007,750,0003,500,000 - The project's annual bperating costs (esduding depreciation) are expected to be 60% of sales. - The compsiy's tax rate is 25%. - The company is extremely prottable; so if any losses are incurred from the high-protein energy smoothe project they can be used to partially offet taves paid an the company's cther projects. (That it, assume that it there are any tax credss reiated to this project they can be used in the year they occur.) - The project hes a WACC =10.04. What is the project's expected NPY and IRR? Found your answers to 2 decimal places. Do not round your intermediate caiculatons. NDP IfR Should the firm acceot the preject? depend on whether the "weight loss' smoothie is weil received by consumers. There is a 40 os chance that demand will be good, in which case the project will produce atteritar cash flows of t1. 9 milien at the end of each of the next 3 years. There is a sow chance that denund wil be poos, in which case the after-tax casa flows will be 30.5 mililon foe 3 years. The project is nisioer than the firm's other projects, se it has a wace of 11%. The firm will know it the project is successful after receiving the cash nows the first year, and atter receving the first year's cash flows it will have the optisa to abandon the project. If the firm decides to abandon the project the corrpany will not receive any cash fows after t a 3 , but it wal be able to seil the assets releted to the project for $2.25 millon anter taxes at t=1. Assuming the company has an optian to abandan the project, what is the expected NpV er the project todry? Hound roar antwer to 2 decimal places. Do not round your intermed ate caiculations. Use the vilues is "millions ol dollar" to ascertain the answer. milions of dollars Step by Step Solution
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