Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The vegetarian burgers of Beyond Meet Ltd. are made of green mung beans. There was a drought in India recently and the company would like

The vegetarian burgers of Beyond Meet Ltd. are made of green mung beans. There was a drought in India recently and the company would like to secure the price of Mung beans used in its products. To do so the company is looking to sign a forward contract with the Thai company Green is Always Good (GAG) for 20,000 Kg at a future price of $1.28.

Beyond Meet is looking to expand its operation and sell green Mung Beans as an independent product. The company estimates that the new line of business will require an investment of $10m, the cost of importing green Mung Beans is $1.25/kg and that the company can sell each bag in the United States for a price that is $0.15 higher (i.e. $1.40). Assume that both the payment for important green Mung Beans and the revenue from selling it occur at the end of the year.

How many Kilograms per year will the company need to sell in order to ensure that the project has positive NPV (that is the break-even point) if the project lasts for perpetuity and the cost of capital is 20% p.a.?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Valuation Measuring and managing the values of companies

Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel

5th edition

978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470

More Books

Students also viewed these Finance questions

Question

How do the events of normal aging affect life satisfaction?

Answered: 1 week ago