The expected return from previous is 10.4% or .1044

Please do 8-11 and show the work. thank you!

More information was needed for questions 8-11, so i added in the answers to 1-7 and all the information before in order for you to answer 8-11. thank you!

8. Compute the NPV if costs go up 10% 9. Compute the sensitivity of NPV to a change in unit sales 10. Compute the minimum sales price per unit to get an NPV of at least $0 11. Compute the NPV if prices and all costs were expected to rise by 2% per year due to expected inflation (helpful hint: use the growing annuity formula for the annual after-tax cash flow; or H. Capital Budgeting Analysis Use your company's expected return as the cost of equity capital (that is the required expected return on the stock in the market from B.1) as the required return (or discount rate) to evaluate the following capital budgeting proposal for your company: A proposal to build an $87 million factory is being contemplated to produce a new product. The factory is expected to last 20 years (but can be depreciated immediately according to current accounting rules). The factory is expected to produce 8000+U units per year that are expected to be sold for a price of $26,000 each. Variable costs (production labor, raw materials, marketing, distribution, etc.) are expected to be $ 17,000 per unit. Fixed costs (administration, maintenance, repairs, utilities, insurance, real estate taxes, etc.) are expected to be $15 million per year. The tax rate is 21%. The project will require $42 million in inventory (raw materials and finished products) as well as $55 million in receivables (credit for customers). An extra $18 million in cash is required as a safety stock to provide financial flexibility (that enables avoiding running out of cash in case of temporary declines in demand). Suppliers (companies which sell the parts and raw materials that are used in the production of the 8000 units produced by the factory) are expected to provide short-term trade credit that is expected to sum to $7 million in accounts payable while short-term accrual financing of $11 million is supplied by the employees (who don't get paid until the end of the month) 23:44 vil E Calcolatie Werking Cabled to be Indied in the Beaming Increase in tinent Auch Teventy 42 3) Receivable 55 Cach 115 AND HDD (ies les Theros de com Liabile 13 Short - kom hade eredt Skool lom acoma finorting 11 Ne Waskine Gabbal Reguered. 93 Celulation of Tribal Tweakentant fucking lost Add: Nel Wooking laptel thatodered Intrat investment 194 Note Entere factory cost will be Depreciated in 1st year Calculation of Annual Cash Inflows. 1 2 to 19 20 208.00 15.00 208.00 15.00 208.00 15.00 136.00 136.00 Total Revenue (8000*26000) less:Fixed Operating Costs less:Variable Operating Costs (8000*17000) less:Depreciation (a) Profit before tax less:Taxes @21% Profit After tax Plus: Depreciation Plus: Working Capital Released Net Free Cash Flow 136.00 87.00 (30.00) (6.30) (23.70) 87.00 57.00 11.97 45.03 57.00 11.97 45.03 97.00 142.03 63.30 45.03 Computation of NPA Computation of NPV. year cash flow PVF @ 10.44% Present value 1 63.30 0.91 57.32 2 to 191 45.03 7.221 325.18 201 142.03 0.137 19.49 total present value of cash flows 401.98 Capital Investment 184.00 NPV 217.98 Computation of IRR. first calculate NPV at any higher rate say 20% year cash flow PVF @ 20% Present value 1 63.30 0.83 52.75 2 to 19 45.03 4.010 180.58 20 142.03 0.026 3.70 total present value of cash flows 237.03 Capital Investment 184.00 NPV 53.03 Calculation of IRR IRR = Lower rate {NPV(lower rate) (higher rate - lower rate)} INPVflower rate) - NPV higher rate)) - 10.44% + 217.98 . (20-10.44) 217.98 - 52.03 = 10.44% +12.56 23% Since the NPV of the project is POSITIVE and also IRR is higher than the required rate of return, hence the project is considered as Financially viable. Since it is a profitable project and leads to positive NPV, hence the project will result in INCREASE in Shareholders wealth. year CF pvir in the question initial investment was calculated as $184 million 4. >>since the NPV of the project is positive, the project should be accepted. 5. -> payback period The payback period refers to the amount of time it takes to recover the cost of an investment or how long stakes for an investor to reach becakeven. Account and fund managers we the payback period to determine whether to go through with an investment Shorter paybacks mean more attractive investments, while longer payback periods are less desirable cumulative pvof Cumulative CE CF pv 1 63.30 13.30 0.9055 573257.32 2 45.09 108.33 0.8199 36 92 94.24 3 45.03 153.36 0.1424 33.41 127.66 4 45.03 198.39 0.6722 30.27 157.93 5 45.03 243.42 0.60872741 185.34 6 45.03 288.45 0.5511 242 210.16 745.03 333.48 0,4990 22.47 232.63 45.03 378.51 0.4518 20:15 252.97 94501 423.54 0.4091 18.42 271.40 10 45.03 468 57 0.3705 16.68 288.08 11 45.03 $13.60 03354 15.10 303.18 12 45.03 558,63 03037 13.65 316.86 13 45.03 603.66 0.2750 1238 329.24 14 45.03 648.69 0.2490 11.21 340.46 15 45.09 693.72 0.2255 10:15 350.61 16 45.03 738.75 0.2042 9.19 359.80 17 45.03 783.78 0.18498 32 368.13 18 45.03 2881 0.1674 754 375.67 19 45.03 87384 0.1516 6X2 382.49 20 142.03 1015.87 0.1372 19.4940198 payback period = 3+ (184-153.36)/45.03 = 3.6804 years discounted payback period 4+ (184 - 157.93)/27.41 34.95109 years since in the given question 5 years of payback is required, the project should be accepted as the payback period drives outless 6. => equated annual cashflow = NPV / PVAF = 217.98/B.2640 $26.38 million year EAC The project should be accepted as the another project could generate only $12 million each year 7. => NPV for half the demand initial outflows 184 year revenue fixed cost variable cost depreciation PBT T PAT Depreciation working capital Net case fow if PV ! 104 15 68 7 -66 -13.86-52.14 87 34 055 31 56 2 104 15 21 441 16:59 16.59 199 13.00 3 104 15 6% 21 4.41 16:39 07441232 4 104 15 68 21 441 1659 0.6722 11:15 5 104 15 68 21 441 16:59 0.6087 10.10 6 104 15 68 21 441 16 50 551114 7 104 IS 68 21 441 16:59 8 104 15 68 21 441 16.59 0.4515 750 9 104 15 68 214411659 0.49 6.79 10 104 15 68 21 441 1659 0.3705 615 11 104 15 68 21 441 16 59 1354556 12 104 15 68 21 441 16:59 16.50 2017504 13 104 15 68 21 441 16 59 16.59 2750 456 14 104 15 6R 21 441 16 59 16.99 0.390 413 15 104 15 68 21 441 16 59 16.50 0.2255 3.74 16 104 15 68 21 4.41 16:39 2042 3:39 17 104 15 21 441 16 59 1650 0.1509 30 18 104 15 68 21 441 16 59 16 50 0.1674278 19 104 15 68 214.41 1659 0.1516 2.51 20 104 15 68 21 441 16:59 97 1150 0.1372 15.59 Docal 166.95 NPV = PV-initial outflow 166.95 - 184 = (17.05) since NPV is negative project should not be accepted if the demand is only for hall