Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

PLEASE make it 6years, and show me on the excel :) Amadeus Corporation is considering the issue of a new product to be added to

image text in transcribed

image text in transcribed

PLEASE make it 6years, and show me on the excel :)

Amadeus Corporation is considering the issue of a new product to be added to its product mix. They hired you, a recent business graduate from MacEwan, for conducting the analysis. The production line would be set up in an unused space at the company's main plant. The plant space could be leased out to another firm for S25,000 per year. They have to buy new machinery. The approximate cost of the machine would be $200,000, with another $10,000 in shipping and handling charges. It would also cost an additional S30,000 to install the equipment. The machinery has an economic life of 5 years and would fall under Class 8 with a CCA rate of 20%-The machinery is expected to have a salvage value of $25,000 after 5 years of use The new product line would generate incremental sales of 1,250 units per year for 5 years and they are expected to grow 10% per year. The cost per unit is estimated in $75 per unit in the first year. Each unit can be sold for S200 in the first year. The sales price and cost are both expected to increase by 2.5% per year due to inflation. The fixed costs are estimated to be $100,000 per year and would increase with inflation. To handle the new product line, the firm's net operating working capital would have to increase by an amount equal to 15% of sales revenues. The firm tax rate is 35%, and its overall weighted average cost of capital (WACC) is 14%. The project is considered by the financial department to be as risky as the company

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

International Finance Exchange Rates And Financial Flows In The International Financial System

Authors: Heather D. Gibson

1st Edition

0582218128, 978-0582218123

More Books

Students also viewed these Finance questions

Question

State the uses of job description.

Answered: 1 week ago

Question

Explain in detail the different methods of performance appraisal .

Answered: 1 week ago

Question

Explain the multicultural organization development (MCOD) process.

Answered: 1 week ago