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You have been hired by Dynamic Company, Inc. to help them evaluate two projects and help them select the best one. Project A represents
You have been hired by Dynamic Company, Inc. to help them evaluate two projects and help them select the best one. Project A represents an expansion of an existing product line. Project B involves an entirely new product line. Review each of the worksheets before you start the project. Pay particular attention to the Calculated Summary Worksheet. As you make the calculations for each item you should complete the summary in each cell by entering an = sign and then clicking on that information in the individual Project Worksheet. After doing this if your respective calculations are correct the individual cells on the Calculated Summary Worksheet will be shaded green. The has provided you with the following assumptions needed to evaluate each project: The weighted average cost of capital is 10.0% Expected inflation by year is given in the spreadsheet. That is already built into the variable expenses that are a percent of sales, but not the fixed expenses. Both projects will last for six years and the equipment will last until the end of the project. They use straight-line depreciation for both book and tax depreciation with no salvage value. . Dynamic Company will provide information about initial sales expected and annual increases or decreases in sales. You will also be provided with select information about expense to allow you to forecast those expenses. All fixed expenses except for depreciation will increase at the rate of inflation each year. There are not working capital changes. The company's average tax rate is 25%. You should do a complete statement of cash flows that shows each revenue and expense item. DFOCUS
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