Question
Suppose that Bloopers customers paid their bills with an average 3-month delay (instead of 2 months) and that Bloopers inventories were 20% rather than 15%
Suppose that Bloopers customers paid their bills with an average 3-month delay (instead of 2 months) and that Bloopers inventories were 20% rather than 15% of next years expenses. Use the below Blooper spreadsheet.
See SPREADSHEET 9.1 in the eBook for the baseline project evaluation and resulting NPV assuming 15% inventory expense SPREADSHEET 9.1 Financial projections for Blooper's Magnoosium mine (dollar values in thousands)
Inputs | Spreadsheet Name | ||
Initial Investment | 12,500 | Investment | |
Salvage value | 2,500 | Salvage | |
Initial revenue | 22,000 | Initial_rev | |
Initial expenses | 11,000 | Intial_exp | |
Inflation rate | 0.05 | Inflation | |
Discount rate | 0.12 | Disc_rate | |
Acct receiv. as % of sales | 1/4 | A_R | |
Inven. as % of expenses | 0.2 | Inv_pct | |
Tax rate | 0.21 | Tax_rate | |
a. Would project NPV be higher or lower than that in the Blooper spreadsheet?
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Lower
-
Higher
b. Calculate Bloopers working capital in each year of its project. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)
0
1
2
3
4
5
6
c. What is the change in project NPV? (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)
The NPV Increases from $4223 to ________
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