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Question 1 1 ( 2 0 Points ) Integrated Operating Cash Flows Solar Flares Fireworks is considering adding a new line of fireworks called Sparkly
Question Points Integrated Operating Cash Flows
Solar Flares Fireworks is considering adding a new line of fireworks called Sparkly Boomers to its product line. Sparkly Boomers are expected to have a five year life. Research has been performed for a cost of $ and resulted in the following data:
Sparkly Boomers will need a new factory at a cost of $ million with an installation cost of $ million. year MACRS The land used to build the factory generates $ of income a year.
Sparkly Boomers are projected to sell units a year at a price of $ per unit and an expense of $ per unit
Crackling Fire a current best seller is expected to sell units less a year with a price of $ per unit and a cost of $ per unit.
Soothing Lights is expected to sell units more a year with a price of $ per unit and a cost of $ per unit
If the project is implemented, for $ refurbishing the Crackling Fire's and Soothing Light's factories can be combined this cost is amortized using a year MACRS
The Crackling Fire factory was built years ago for a price of $ million and can be sold today for $ million. This factory had a year MACRS.
At the end of five years the Sparky Boomer factory will be sold for $ million
This project will have no impact on net working capital but will increase fixed expenses $ a year The company has a tax rate.
The company is debt with a pretax cost of and common stock. The common stock's beta is market rate is and risk free rate is
Using the Weighted Average Cost of Capital and the Profit Metrics payback Profit Index, NPV and IRR determine if you should do this project
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