OBJECTIVE OF THIS ASSIGNMENT IS TO COMPLETE THE ATTACHED SPREADSHEET WITH THE KNOWLEDGE AND INFORMATION OF THE BELOW SCENARIO:
Over lunch, you and Mary meet to discuss next steps with the expansion project.
“Do we have everything we need on sales and costs?†you ask. â€ÂIt must be time to compute the net present value (NPV) and internal rate of return (IRR) of the Apex expansion project.â€Â
“We have the data from James and Luke regarding projected sales and costs, respectively, for the food packaging project,†says Mary. “It is feasible to project that we will receive a tax break from this implementation. I have information from our audit firm, which indicates that future depreciation methods for taxes will be straight-line; however, the corporate rates will be reduced to 35% as we assumed in our weighted average cost of capital (WACC) calculation.â€Â
“That sounds good,†you say.
“Right," says Mary. "You can use the WACC of 1% listed in the excel file posted for the computation of the NPV and comparison for IRR."
“I’ve got the information I need from Luke and James,†you say. "Does this look right to you? Here- what they gave me,†you say, as you hand a sheet of paper to Mary.
“Let- look at this now while we’re together,†she says.
The information you hand to Mary shows the following:
Initial investment outlay of $30 million, consisting of $25 million for equipment and $5 million for net working capital (NWC) (plastic substrate and ink inventory); NWC recoverable in terminal year
Project and equipment life: 5 years
Sales: $25 million per year for five years
Assume gross margin of 60% (exclusive of depreciation)
Depreciation: Straight-line for tax purposes
Selling, general, and administrative expenses: 10% of sales
Tax rate: 35%
You continue your conversation.
“It looks good,†says Mary. “Use this information from Luke and James to compute the cash flows for the project.â€Â
“No problem,†you say.
“Then, compute NPV and IRR of the project using the Excel spreadsheet I sent earlier today,†says Mary. “Use the IRR financial function for the computation of IRR.â€Â
“Okay,†you say. "I’ll submit my Excel file showing the computation of cash flows, NPV, and IRR by the end of week so you can look at it over the weekend.â€Â
“Thanks,†says Mary.
PLEASE PROVIDE ACCURATE INFORMATION PLEASE the objective of this assignment is to complete the attached excel spreadsheet
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