Q$3$

Background: Alamac Building Products plans to purchase equipment for $$1,200,000,$ expected to generate $$300,000$ in incremental revenue each year, with a life expectancy of five years and no salvage value.

Task: Determine the after$-$tax cash flows, assuming a tax rate of $35\%$ and calculate the project's NPV$,$ considering the company's required after$-$tax rate of return is $10\%.$ Discuss how tax considerations affect the cash flows and the decision$-$making process from an operational perspective.

Q$4$

Background: Alamac Building Products has two potential investment opportunities. Project A involves an initial outlay of $$450,000$ and is expected to generate annual cash inflows of $$120,000$ for five years. Project B requires an initial outlay of $$600,000$ and will generate annual cash inflows of $$160,000$ for five years.

Task: Calculate and compare the NPV and IRR for both projects using a discount rate of $12\%.$ Explain to the operations managers how these calculations influence decision$-$making and the potential impact on the company's operational strategy.

Instructions for Each Scenario:

$$ Perform the required calculations.

$$ Provide a detailed explanation of the results and their implications for operations managers.

$$ Discuss the strategic considerations that operations managers should be aware of when making capital investment decisions.