Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please show how to get answer on each empty green box, I know the answers I just need to know how to get them (cell

image text in transcribedimage text in transcribedimage text in transcribed

please show how to get answer on each empty green box, I know the answers I just need to know how to get them (cell reference). down below are the answers

image text in transcribed

The Shome Corporation is considering a new project that involves the introduction of a new product. The firm in in the 34 percent marginal tax bracket and has a 15 percent required rate of return or discount rate for new investments. This project is expected to last five years, and then, because this is somewhat of a fad project, it will be terminated. Given the following information, determine the net cash flows associated with the project and the project's NPV, profitability index, and internal rate of return. Apply the appropriate decision criteria. Cost of new plant and equipment: $6,900,000 Shipping and installation costs: $ 100,000 Sales price per unit: $250/unit in Years 1-4, $200/unit in Year 5 Variable cost per unit: $130/unit Annual fixed costs: $300,000 Working capital requirements: There will be an initial working capital requirement of $100,000 just to get production started. For each year, the total investment in net working capital will be equal to 10 percent of the dollar value of sales for that year. Thus, the investment in working capital will increase during Years 1 through 3, then decrease in Year 4. Finally, all working capital is liquidated at the termination of the project at the end of Year 5. The depreciation method: Use the simplified straight-line method over five years. It is assumed that the plant and equipment will have no salvage value after five years. 5 Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the green cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section. Given data: Initial capital expenditure (56,900,000.00) Shipping and installation costs ($100,000.00 Life of the initial expenditure Marginal tax rate 34.00% Discount rate 15.00% Net working capital (% of Sales) 10.00% Net working capital investment (0) (S100,000.00) Fixed costs per year (S300,000.00) Sales price (1-4) $250.00 Sales price (5) $200.00 Variable cost of product (S130,00) Year 0 Units sold Revenues Variable costs Fixed costs Gross profit Depreciation Net opearting income Income taxes Net income Cash flow Year 1 80,000 $20,000,000.00 ($10,400,000.00) ($300,000.00) $9,300,000.00 (S1,400,000.00) $7,900,000.00 (S2,686,000.00) $5,214,000.00 $6,614,000.00 Year 2 100,000 $25,000,000.00 ($13,000,000.00) (S300,000.00) $11,700,000.00 ($1,400,000.00) $10,300,000.00 (S3,502,000.00) S6,798,000.00 $8.198,000.00 Year 3 120,000 $30,000,000.00 ($15,600,000.00) (5300,000.00) $14,100,000.00 ($1,400,000.00) $12,700,000.00 (S4,318,000.00) $8.382,000.00 $9,782,000.00 Year 4 70,000 $17,500,000.00 (59,100,000.00) (S300,000.00) $8,100,000.00 ($1,400,000.00) $6,700,000.00 (S2,278,000.00) S4,422,000.00 $5,822,000.00 Year 5 70,000 $14,000,000.00 (59,100,000.00) (S300,000.00) $4,600,000.00 ($1,400,000.00) $3,200,000.00 (51,088,000.00 $2,112,000.00 $3,512,000.00 ($100,000.00 Additional net working capital Capital expenditure Free cash flow NPV Profitability Index IRR Requirements 1 Start Excel In cells D30-130 do the following: In cell D30, by using a cell reference, determine the new project's additional net working capital for Year 0. In cell E30, by using cell references, calculate the new project's additional net working capital for Year 1. 2 In cell F30, by using relative and absolute cell references, calculate the new project's additional net working capital for Year 2. Copy the formula from cell F30 across columns G-H. In cell 130, by using cell reference calculate the new nrniert's additional not working canital for Year 5. Copy formatting from one location and apply it to another Note: The outputs of the expression or function you typed in cells D30-G30 are expected as negative numbers. (4 pt.) In cell D31, by using cell references, calculate the capital expenditure associated with the new project for Year 0. Note: The output of the expression or function you typed in this cell is expected as a negative number. (1 pt.) 3 5 In cells D33-133 do the following: In cell D33, by using cell references, calculate the free cash flow associated with the new project for Year 0. In cell E33, by using cell references, calculate the free cash flow associated with the new project for Year 1. Copy the formula from cell E33 across columns F - I. (1 pt.) In cell D35, by using cell references and the Excel NPV function, calculate the project's net present value. Note: Enter the appropriate array into the Valuel argument of the Excel NPV function. (1 pt.) In cell D36, by using cell references and the Excel NPV function, calculate the project's profitability index. Note: Enter the appropriate array into the Valuel argument of the Excel NPV function. (1 pt.) In cell D37, by using cell references and the Excel IRR function, calculate the project's internal rate of return. Note: Do not enter any value for the Guess argument of the Excel IRR function. (1 pt.) 8 Save the workbook. Close the workbook and then exit Excel. Submit the workbook as directed. 6 7 Year 0 Units sold Revenues Variable costs Fixed costs Gross profit Depreciation Net opearting income Income taxes Net income Cash flow Year 1 80,000 $20,000,000.00 ($10,400,000.00) ($300,000.00) $9,300,000.00 ($1,400,000.00) $7,900,000.00 ($2,686,000.00) $5,214,000.00 $6,614,000.00 Year 2 100,000 $25,000,000.00 ($13,000,000.00) ($300,000.00) $11,700,000.00 ($1,400,000.00) $10,300,000.00 ($3,502,000.00) $6,798,000.00 $8,198,000.00 Year 3 120,000 $30,000,000.00 ($15,600,000.00) ($300,000.00) $14,100,000.00 ($1,400,000.00) $12,700,000.00 ($4,318,000.00) $8,382,000.00 $9,782,000.00 Year 4 70,000 $17,500,000.00 ($9,100,000.00) ($300,000.00) $8,100,000.00 ($1,400,000.00) $6,700,000.00 ($2,278,000.00) $4,422,000.00 $5,822,000.00 Year 5 70,000 $14,000,000.00 ($9,100,000.00) ($300,000.00) $4,600,000.00 ($1,400,000.00) $3,200,000.00 ($1,088,000.00) $2,112,000.00 $3,512,000.00 ($1,900,000.00) ($500,000.00) ($500,000.00) $1,250,000.00 $1,750,000.00 Additional net working capital Capital expenditure ($100,000.00) ($7,000,000.00) Free cash flow ($7,100,000.00) $4,714,000.00 $7,698,000.00 $9,282,000.00 $7,072,000.00 $5,262,000.00 NPV Profitability Index IRR $15,582,572.99 3.19 85.12%

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

Financial Markets And Institutions

Authors: Frederic S. Mishkin, Stanley Eakins

6th International Edition

0321552113, 9780321552112

More Books

Students also viewed these Finance questions

Question

Describe how self-defeating attitudes create a vicious cycle.

Answered: 1 week ago

Question

=+What action steps will you take to handle this situation?

Answered: 1 week ago