Singapore Industries - Solar Lighting Xora work in the Rhater ifepastinetes of Sing pere Industries, In the fall of cach pear you evalaate all the capital Afreled forwet the home and apartment mark ot but has not ventined into ihe Solar litchung segrient of this market as of the sole rights as utilare their energy eircient sechnolonical breakthrough in new Solat lighting. The contract is conditional upon your board approving the best of theie prejects. The Research 8 . Develepencnt departicnt hac ocmpleted the design protofype at a cost of 5k00,000 and if is ready for: Production. To intrudace this prodiuct fine witi require the piarchase of additional production capacify which can be boilit. and paid foe during 2021 and ready to begin production on January 1, 2022. The cost to develop this capaciry will be 560,500,000. It is estimated that 5700,000 of adititional net working capital will be nected to implement the project. Alt partess working on this project agree the level of riak involved meets about the average risk of projects the colupany nomally undertakes due to the newness of the icelanology involved. Capital Investment Criteria: The botard of ditectors has adopted the following criteria to be used in evalaatane all capital investrment projects: - Payback period may not exceed 4 yearn. - NPV must be positive using the firms weighted average cost of capital. - IRR must at least excecd the firm's cost of capital. - When projects represent greater than averame risk, a 2% adjustment to the cost of capital as well as the minimum IRR must be applied. If a project represents less than average risk, the cost of capital atid IRR. could also be reduced by 2%. When available empital is insuficient to pursuc all projects whichmeet the above criteria, the project(s) which provides the largest impact to shareholder value will be adopted until the maximum amount avaifable is fully utilized, You have becn informed that 5144m tllion is the maximum amount of eapital investment the firm is willing to consider this year. Investments up to that amount will not result in any increase in the marginal cost of capital. Orher Projects under Consideration: Assignment: Analyze this project to detcrmine if it mects the criteria established by the board af directors and provide your recommendation concerning which project(s) should be pursued. Enter the rulevant cash flows. Cost-of Capital cafculations and the NPY. IRR &. Payback period findings on the followingpage in the designated boxes. Also enter-the NPV. IRR de Payback. Period along with your recommendations lo accopt or reject cach of the five projects in the blank spaces provided above. Singapore Industries - Solar Lighting Xora work in the Rhater ifepastinetes of Sing pere Industries, In the fall of cach pear you evalaate all the capital Afreled forwet the home and apartment mark ot but has not ventined into ihe Solar litchung segrient of this market as of the sole rights as utilare their energy eircient sechnolonical breakthrough in new Solat lighting. The contract is conditional upon your board approving the best of theie prejects. The Research 8 . Develepencnt departicnt hac ocmpleted the design protofype at a cost of 5k00,000 and if is ready for: Production. To intrudace this prodiuct fine witi require the piarchase of additional production capacify which can be boilit. and paid foe during 2021 and ready to begin production on January 1, 2022. The cost to develop this capaciry will be 560,500,000. It is estimated that 5700,000 of adititional net working capital will be nected to implement the project. Alt partess working on this project agree the level of riak involved meets about the average risk of projects the colupany nomally undertakes due to the newness of the icelanology involved. Capital Investment Criteria: The botard of ditectors has adopted the following criteria to be used in evalaatane all capital investrment projects: - Payback period may not exceed 4 yearn. - NPV must be positive using the firms weighted average cost of capital. - IRR must at least excecd the firm's cost of capital. - When projects represent greater than averame risk, a 2% adjustment to the cost of capital as well as the minimum IRR must be applied. If a project represents less than average risk, the cost of capital atid IRR. could also be reduced by 2%. When available empital is insuficient to pursuc all projects whichmeet the above criteria, the project(s) which provides the largest impact to shareholder value will be adopted until the maximum amount avaifable is fully utilized, You have becn informed that 5144m tllion is the maximum amount of eapital investment the firm is willing to consider this year. Investments up to that amount will not result in any increase in the marginal cost of capital. Orher Projects under Consideration: Assignment: Analyze this project to detcrmine if it mects the criteria established by the board af directors and provide your recommendation concerning which project(s) should be pursued. Enter the rulevant cash flows. Cost-of Capital cafculations and the NPY. IRR &. Payback period findings on the followingpage in the designated boxes. Also enter-the NPV. IRR de Payback. Period along with your recommendations lo accopt or reject cach of the five projects in the blank spaces provided above
