Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
You work for LifeRhythm Devices, a company that makes wearable heart - monitoring devices. You are now reviewing information about a new product. You think
You work for LifeRhythm Devices, a company that makes wearable heartmonitoring devices. You are now reviewing information about a new product. You think you should be able to sell units of these devices per year for years. Your team has spent $ million designing and testing the products in the past two years. You think you can charge $ per unit and the production of the devices will cost $ per unit includes both materials and labor costs In addition, this project will also incur a marketing cost of $ million per year. If you were to launch the production, you will have to buy new equipment worth $ million. This equipment will have a year life and will be depreciated straight line to a book residual value of $ million over that life. You expect you will be able to sell the equipment for $ million when the project ends in years. Your company already had an existing net working capital level at $ million. Production of the new product will require you to increase your working capital from $ million to $ million immediately. Working capital will decrease back down to $ million at the end of the third year. The company currently leases a private jet for its CEO, which costs $ million annual lease. Your tax rate is What is the NPV of the project of the discount rate is When answering this question, show detailed steps in the space given where you are instructed to "show your work here". a List Operating Cash Flows in the table below. tableYearOCF Show your work here: b List the change of Net Working Capital in the table below. List increase as and decrease as tableYearChg Of NWCddots,,, Showing your work for part b is optional c List the change of Capital Investment in the table below. List increase as and decrease as tableYeartableChg of CapitalInvestment Show your work here: d List the incremental free cash flow in the table below based on your answer from part a to c tableYearIncremental FCF Showing your work for part d is optional e If the appropriate discount rate for this project is should LifeRhythm accept the project? Explain.
You work for LifeRhythm Devices, a company that makes wearable heartmonitoring devices. You are now reviewing information about a new product. You think you should be able to sell units of these devices per year for years. Your team has spent $ million designing and testing the products in the past two years. You think you can charge $ per unit and the production of the devices will cost $ per unit includes both materials and labor costs In addition, this project will also incur a marketing cost of $ million per year. If you were to launch the production, you will have to buy new equipment worth $ million. This equipment will have a year life and will be depreciated straight line to a book residual value of $ million over that life. You expect you will be able to sell the equipment for $ million when the project ends in years. Your company already had an existing net working capital level at $ million. Production of the new product will require you to increase your working capital from $ million to $ million immediately. Working capital will decrease back down to $ million at the end of the third year. The company currently leases a private jet for its CEO, which costs $ million annual lease. Your tax rate is What is the NPV of the project of the discount rate is When answering this question, show detailed steps in the space given where you are instructed to "show your work here".
a List Operating Cash Flows in the table below.
tableYearOCF
Show your work here:
b List the change of Net Working Capital in the table below. List increase as and decrease as
tableYearChg Of NWCddots,,,
Showing your work for part b is optional
c List the change of Capital Investment in the table below. List increase as and decrease as
tableYeartableChg of CapitalInvestment
Show your work here:
d List the incremental free cash flow in the table below based on your answer from part a to c
tableYearIncremental FCF
Showing your work for part d is optional
e If the appropriate discount rate for this project is should LifeRhythm accept the project? Explain.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started