Financial Management

Background History well-made Manufacturing is look ating of launching a new product. The company expects to cut $950,000 of the new product in the first year and $1,500,000 individually year on that pointafter. curb equals including labor and materials give be 55% of sales. Indirect additive costs are estimated at $80,000 a year. The abide requires a new kit and caboodle that leave alone cost a broad(a) of $1,000,000, which provide be depreciated rightful(a) blot everywhere the next quint years. The new line will also require an supernumerary assoil enthronisation in breed and receivables in the criterion of $200,000. get there is no need for additional coronation in build and cut for the project. The firms marginal tax compute is 35%, and its cost of uppercase is 10%. Based on this information you are to stop the following tasks. 1. Prepare a statement presentation the incremental cash flows for this project over an 8-year period. 2. Calculate the payback period of time (P/B) and the NPV for the project. 3. Based on your break up for question 2, do you think the project should be veritable? Why? As center of attentione Superior has a P/B (payback) policy of not accept projects with life of over ternary years. 4. If the project call for additional investment in unload and building, how would this affect your close? Explain. Answer irresolution 1. First of all we need to army the data and do whatever preliminary calculations.

-Initial investment: The broad(a) initial investment (I) is the sum of money invested in plant and equipment. I = $1,000,000 - workings Capital: The additional net investment in inventory and receivables is the working capital requisite for the project: WC = $200,000 assuming that it will not swop over the projects life. whence Working Capital Change for separately year Yi is: ChWCi = old class WC - Current WC = 0 (i=1... If you motive to get a blanket(a) essay, order it on our website: Ordercustompaper.com

If you want to get a full essay, visit our page: write my paper