Answered step by step
Verified Expert Solution
Question
1 Approved Answer
*please show excel formulas* please show working for 0-3 years 7. The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has
*please show excel formulas*
please show working for 0-3 years
7. The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years. The cost of the machine is $30,000 and the machine will be depreciated straight line over its three-year life to a residual value of so. The cane manufacturing machine will result in sales of 1900 canes in years 1-3 and afterwards. The price per cane that Sisyphean will charge its customers is $19 each and is to remain constant. The canes have a manufacturing cost of $9 each. It is assumed that sales and marketing will cost $2,000 per year. The firm is in the 21% tax bracket and has a cost of capital of 10%. a. Calculate EBIT, net income and the Free Cash Flow for each year relevant for the project (0-4). b. Make the necessary calculation to determine whether the project should be pursued? Explain. C. Perform a sensitivity analysis of the project: In the optimistic case, assume that sales are 10% higher and the manufacturing cost is $z lower. In the pessimistic case, sales are 10% lower and the sales price is $2 lower. Should the project be pursued in the optimistic and pessimistic case Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started