The teacher only gave us the problem I listed above to go off on, below I attached some other info after looking around but I'm not even sure if it even relates to the problem I posted.
Tomas Co. wants to add a production line. To do this, the company must spend $200,000 to expand its current building and purchase $1 million in new equipment. The new production line is expected to produce 100,000 units per year of a new product, which has a projected sales price of $7.75 per unit and a variable cost of $3.90 per unit. Introducing the new product is expected to cause sales of existing products to decrease by $89,000 per year and existing costs to decline by $49,000 per year. Fixed costs of the new line will be $142,000 annually. The company expects net working capital to increase by $1,800,000 when the new line is added, and then decrease by that amount when the project ends in five years. Tomas also expects to sell the equipment and building space at the end of the project in five years to net $320,990.36 after taxes. The company has a 34 percent marginal tax rate. Tomas' cost of capital is 11%. Depreciation would be as follows, Year 1:$206,349.20 Year 2:$326,349.20 Year 3: $198,349.20 Year 4:$121,549.20 Year 5: $121,549.20 Instructions: 1) Use an Excel spreadsheet to evaluate the Tomas Company proposal. 2) Conduct a sensitivity analysis that focuses on the cost of capital. For a best-case scenario, decrease the cost of capital by three percentage points. For a worst-case scenario, increase the cost of capital by three percentage points. 3) You must provide one spreadsheet for each of the three situations - the base case estimate, the best case, and the worst case. 4) What do you recommend? Explain. You may type your recommendation and explanation on the Excel sheet. Assets Reserves Cash items in Process of Collection Deposits at Other Banka Becurities Loans Commercial and indusial Real Esate Consumer interbank Other Other Assets Total Assets 12305[10000W11214 100 60. 1970100.00W/217100100.004 Liabilities (Sources of Funds) Chequabie deposirs Nonsarsaction deposars Savings deposits Small-denomination time depesins Large-denomination time deposit: Borrowings Bariceankal Totat Liabitities = \begin{tabular}{ll|cccccc} & & Common & & Common Danks in Common \\ Your Common- Your & SireYR & Your & SixeYR & Your Sire \\ Bank, SizeYR 3 & Bank, & 2 & Bank, & 1 & Region Region \\ Year 3 & Year 2 & Year 1 & Year 3 \end{tabular} Operating lneome interest on Loans Interest on Securities Other interest Interest Income Service Charges on Deposits Accouns Other Noninterest incore Noninterest income Total Operating lneonse Operating fixpenses Interest expenses interest on Deposits Interest on Fed Fuands and Repos. otwer Nonimerest Expentes Selaries and Employne berefics Premises and Equpment Orhee Provisions for Loan Losses Total Operating Expenses Net Oparating lncome Gains (Losses) on Securities Extraordinary itemsinet income Twoes Net ineome ROA \& ROE ROA ROE ROA Strengths and Weaknesses Strengths of My Bank Weaknesses of My Bank Tomas Co. wants to add a production line. To do this, the company must spend $200,000 to expand its current building and purchase $1 million in new equipment. The new production line is expected to produce 100,000 units per year of a new product, which has a projected sales price of $7.75 per unit and a variable cost of $3.90 per unit. Introducing the new product is expected to cause sales of existing products to decrease by $89,000 per year and existing costs to decline by $49,000 per year. Fixed costs of the new line will be $142,000 annually. The company expects net working capital to increase by $1,800,000 when the new line is added, and then decrease by that amount when the project ends in five years. Tomas also expects to sell the equipment and building space at the end of the project in five years to net $320,990.36 after taxes. The company has a 34 percent marginal tax rate. Tomas' cost of capital is 11%. Depreciation would be as follows, Year 1:$206,349.20 Year 2:$326,349.20 Year 3: $198,349.20 Year 4:$121,549.20 Year 5: $121,549.20 Instructions: 1) Use an Excel spreadsheet to evaluate the Tomas Company proposal. 2) Conduct a sensitivity analysis that focuses on the cost of capital. For a best-case scenario, decrease the cost of capital by three percentage points. For a worst-case scenario, increase the cost of capital by three percentage points. 3) You must provide one spreadsheet for each of the three situations - the base case estimate, the best case, and the worst case. 4) What do you recommend? Explain. You may type your recommendation and explanation on the Excel sheet. Assets Reserves Cash items in Process of Collection Deposits at Other Banka Becurities Loans Commercial and indusial Real Esate Consumer interbank Other Other Assets Total Assets 12305[10000W11214 100 60. 1970100.00W/217100100.004 Liabilities (Sources of Funds) Chequabie deposirs Nonsarsaction deposars Savings deposits Small-denomination time depesins Large-denomination time deposit: Borrowings Bariceankal Totat Liabitities = \begin{tabular}{ll|cccccc} & & Common & & Common Danks in Common \\ Your Common- Your & SireYR & Your & SixeYR & Your Sire \\ Bank, SizeYR 3 & Bank, & 2 & Bank, & 1 & Region Region \\ Year 3 & Year 2 & Year 1 & Year 3 \end{tabular} Operating lneome interest on Loans Interest on Securities Other interest Interest Income Service Charges on Deposits Accouns Other Noninterest incore Noninterest income Total Operating lneonse Operating fixpenses Interest expenses interest on Deposits Interest on Fed Fuands and Repos. otwer Nonimerest Expentes Selaries and Employne berefics Premises and Equpment Orhee Provisions for Loan Losses Total Operating Expenses Net Oparating lncome Gains (Losses) on Securities Extraordinary itemsinet income Twoes Net ineome ROA \& ROE ROA ROE ROA Strengths and Weaknesses Strengths of My Bank Weaknesses of My Bank
