question 5 please

Since LSUS corporation is producing at full capacity, Amande has decided to have Han examine the fexsibility of a new manufacturing plant. This erpunsion woeld represent a major capital outlay for the company. A preliminary analysis of the projoct has been conducted at a cost of $1.6 million. This analysis determined that the new plant will reyuire an inanetiate outlay of $54 million asd an additional ouflay of 531 millioe in one year. The coengany has received a special tax dispensation that will allow the building and equipment to be depreciated on a 20-year MACRS schedule. Because of the time necessary to build the new plant, as ales will be possible for the next year. Two years trom now, the company will have partial-year sales of $17 million. Sales in the following four years will be $28 million, $37 miline. $40 millice, and $43 million. Betause the new plant will be more efficieat than LSUS corporation's curreat manafacturing facilities, variable costs are expected to be 65 perceat of saies, and fived coses will be 52.4 million per year. The new plant will also require net working capial amountiog to 8 percert of sales for the next year. Han realizes that sales from the new plant will continue into the iedefinite future, Because of this, he believes the cash flows after Year 5 will ceetiace to grow at 2.5 percent indefinitely. The company's tax rate is 40 percent and the required return is 12 pervent. 1) Amanda is not sure about the capital badgeting techaique and want like Han to elaborate clearly what are and are not important clements to engage the capital budgeting decision for the LSUS corporation. 2) Amanda is recommended to use profitabelity inder, NPV, and IRR, the wants Han to examine extensively the benefits and drawbacks of each approach. 3) After the examine of three approsches, Amandes would like Han to anslyze the financial viability of the new plant and calculate the profitability indec, NPV, and IRR. 4) After the empirical results, Han would like to provide the recommendation to Amanda and Board of directors, what is Han's recoenimendusioe?' Amasda also wants Han to 4 peovide a sensitivity analysis and change awy one of elements docunserted befoee and see what happens? For example, increase or decrease goowth rate and at what level the firm can break even when NPV=0. 5) Amanda has instructed Han to disegard the value of the land that new plast will require. LSUS Compocation already owns it, and a practical matter, it will sineply go unused indefinitely. Sbe has asked Han to disewss this isses in bis report. Since LSUS corporation is producing at full capacity, Amande has decided to have Han examine the fexsibility of a new manufacturing plant. This erpunsion woeld represent a major capital outlay for the company. A preliminary analysis of the projoct has been conducted at a cost of $1.6 million. This analysis determined that the new plant will reyuire an inanetiate outlay of $54 million asd an additional ouflay of 531 millioe in one year. The coengany has received a special tax dispensation that will allow the building and equipment to be depreciated on a 20-year MACRS schedule. Because of the time necessary to build the new plant, as ales will be possible for the next year. Two years trom now, the company will have partial-year sales of $17 million. Sales in the following four years will be $28 million, $37 miline. $40 millice, and $43 million. Betause the new plant will be more efficieat than LSUS corporation's curreat manafacturing facilities, variable costs are expected to be 65 perceat of saies, and fived coses will be 52.4 million per year. The new plant will also require net working capial amountiog to 8 percert of sales for the next year. Han realizes that sales from the new plant will continue into the iedefinite future, Because of this, he believes the cash flows after Year 5 will ceetiace to grow at 2.5 percent indefinitely. The company's tax rate is 40 percent and the required return is 12 pervent. 1) Amanda is not sure about the capital badgeting techaique and want like Han to elaborate clearly what are and are not important clements to engage the capital budgeting decision for the LSUS corporation. 2) Amanda is recommended to use profitabelity inder, NPV, and IRR, the wants Han to examine extensively the benefits and drawbacks of each approach. 3) After the examine of three approsches, Amandes would like Han to anslyze the financial viability of the new plant and calculate the profitability indec, NPV, and IRR. 4) After the empirical results, Han would like to provide the recommendation to Amanda and Board of directors, what is Han's recoenimendusioe?' Amasda also wants Han to 4 peovide a sensitivity analysis and change awy one of elements docunserted befoee and see what happens? For example, increase or decrease goowth rate and at what level the firm can break even when NPV=0. 5) Amanda has instructed Han to disegard the value of the land that new plast will require. LSUS Compocation already owns it, and a practical matter, it will sineply go unused indefinitely. Sbe has asked Han to disewss this isses in bis report