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We are going to design and build a brand - new manufacturing facility to produce a new kind of high - pressure valve assembly The

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We are going to design and build a brand-new manufacturing facility to produce a new kind of high-pressure valve assembly
The design of the plant will take 1 year and is expected to cost 15M
Manufacturing of the plant will take 1 year and will cost 85M to build and commission
You expect the plant will produce these valves for the next 10 years, prepare yearly incremental before-tax and after-tax cash flows
Prepare yearly incremental before-tax and after-tax cash flows
You plan for the following:
You expect to be able to sell a valve assembly for $5500 each
You expect to produce 12,000 per year at maximum output
In Year 1, production is expected to be 70% of max output, Year 2=80%, Year 3=90%, and Year 4 to 10=100%
Given the difficulty in making these valves, you expect 4% of them will not pass quality control and will be effectively garbage
You believe cost of goods sold will be $3000 eventually, but in the first year of production it will be $4000 and you expect it to decrease by $200 each year until it hits $3000
Your fixed costs to operate the facility are expected to be $5M per year
CCA rate is 25% for the facility, and you will be able to include the costs of design, build, and commission as part of the plant
The corporate income tax rate is 34%
This plant will be your only operation, meaning if you ever have negative taxible income, you cannot use it elsewhere (ie. taxible income cannot be $0)
a) What is the total pre-tax cash flow at the end of 10 years of production (including capital costs)? Enter your answer in thousands.
$
b) What is the total after-tax cash flow at the end of 10 years of production (including capital costs)? Enter your answer is thousands.
$
c) What is the maximum contribution margin (in percent, round to nearest tenths)?
d) What year had the highest total cost of goods sold? Year
e) What was the highest amount of corporate income tax paid in any year? Enter your answer in thousands. $
f) What year had the highest after-tax cash flow? Year
g) What is the UCC at the end of Year 10 of operations? Enter your answer in thousands $
h) What was the CCA amount at the end of Year 5 of operations? Enter your answer in thousands
$
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