Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Zinc Corporation is in the business of manufacturing parts for cars and is expanding its business in USA. The company is considering an addilional plant

image text in transcribed
Zinc Corporation is in the business of manufacturing parts for cars and is expanding its business in USA. The company is considering an addilional plant in Alabama The following information has been gathered to assess this project. The initial investment required is USD 2 million. inflation in US is projected to be 3% for next 5 years. Project manager expects the year 1 price per unit is $15 will remain constant for next five years. It is also expected the project will run 40% capacty in year 1,50% in year 2. 80\% in year 3 , and 100% for year 4 and 5 . The maximum plant capacity is 3,000,000 units per year. The variable costs will increase ty rate of inflation in US. The variable costs for the year 1 is USD B. The sales and general expenses are expected to be 10\% of the total sales. The imvestment in Plant and equipment is USD 1.5 million. It will be fully depreciated in 5 years. The US corporate tax rate is 35%. The changes to net operating working capital is 3.5% of sales reverwe. The plant will experience no additional capital expenditure. The interest expenses is $150,000 per year and will remain same. The project will be terminated in Year 5 . The terminal value of the project is the present value of perpetual free cashiflow in the 5 th year. The growth rate in cash flow is assumed to be zero. The WacC for the project is to.75\% Calculate the NPV for the project. 60,240,59161,331,80065,771,324 QUESTION 21 Cilculate the 15RR for the project. [Please see question 20 for detalis] 300%220%210% QUESTION 22 5anould you aocept of reinct tie sroped. Acoeph Prejed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

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

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

Students also viewed these Finance questions