SShould. Kraemer launch the new product? Why?

How would you explain to your CEO what NPV means in business terms

Are you sure your NPV calculation is 100% correct? What else should you do to help the analysis?

How is the business risk accounted for in this project?

Kraemer Company is launching a new product. The following information relates to the launch: $ $ 1) 4 year project life 2) New equipment cost 3) Equipment ship & install cost Related start up cost 5) Inventory increase 6) Accounts Payable increase 7) Equip. salvage value after tax $ $ $ $ $ $ (200,000) (35,000) (5,000) 25,000 5,000 15,000 8) Sales for first year 9) Sales increase per year 10) Operating cost: as a percent of sales 11) Depreciation expense 12) Tax rate 13) WACC 200,000 5% (120,000) -60% (60,000) -21% 10% $ Cash Flow Framework: 0 1 2 3 4 Year Investments: Total O Operations: Operations: Revenue Operating Cost Depreciation EBIT Taxes Net Income Add back - Depreciation Total Terminal: Total Cash Flows $ $ $ $ $ $ $ NPV = IRR = Payback= Kraemer Company is launching a new product. The following information relates to the launch: $ $ 1) 4 year project life 2) New equipment cost 3) Equipment ship & install cost Related start up cost 5) Inventory increase 6) Accounts Payable increase 7) Equip. salvage value after tax $ $ $ $ $ $ (200,000) (35,000) (5,000) 25,000 5,000 15,000 8) Sales for first year 9) Sales increase per year 10) Operating cost: as a percent of sales 11) Depreciation expense 12) Tax rate 13) WACC 200,000 5% (120,000) -60% (60,000) -21% 10% $ Cash Flow Framework: 0 1 2 3 4 Year Investments: Total O Operations: Operations: Revenue Operating Cost Depreciation EBIT Taxes Net Income Add back - Depreciation Total Terminal: Total Cash Flows $ $ $ $ $ $ $ NPV = IRR = Payback=