6(2) The main products of a multinational company are sportswear, shoes and hats, and football. In 2005, the Planning Department found a sporting goods market with broad prospects and no major manufacturers involved—table football. The Planning Department believed that the potential market for this new type of sports game was very broad. According to the company's cost advantages and market expansion capabilities, it is believed that once the company is put into production, it will be difficult for other competitors to intervene in this market. In the second half of 2006, the company decided to evaluate the market potential of table football. According to the evaluation results of authoritative organizations, table football may account for more than 20% of the entire sports game market, and the company spends an evaluation fee of 200,000 US dollars. The project is planned to be located in an idle plant of the company in New Jersey. The original purchase price of the plant was US$600,000, and the accrued accumulated depreciation was US$400,000. It is estimated that it can be used for 5 years. The residual value income required by the tax law is 10 000 dollars, the estimated residual value income is 8 000 dollars, if the realizable income brought to the company by selling now is 150,000 dollars. The evaluation of other aspects of the project is: the purchase of special production equipment requires US$100,000, and the residual value income specified by the tax law at the end of the 5th year is US$5,000. It is expected that it can be sold at the price of US$6,000 at the end of the 5th year; The sales of football are 5000, 8 000, 12 000, 10 000 and 6 000 respectively; the sales price per unit is US$20 in the first year. Taking into account future inflation and market competitiveness, the price will be increased by 2 per year. Increase the price by a percentage of %; the cost of production and sales per unit for the first year is $6. Considering the particularity of the raw material market, the cost of production and sales will increase by 5% each year; used for raw material procurement, inventory, and other aspects of operation Funding estimate: 91% of cash received during the first year of sales, and the remaining de-sold part can only be received in the second year; the estimated expenditure for the purchase of materials in the first year can be extended to the second year of payment of 3,000 US dollars; in order to prevent out of stock Adversely, the inventory of USD 2,500 will be maintained in the first year; in order to prevent shortage of project cash, a reserve cash of USD 1,500 will be maintained. Working capital will increase by 8% in the first 4 years, and will be reduced to zero at the end of the fifth year of the project. The working capital of the first year will be advanced at the beginning of the first year, and at the end of each year in subsequent years. occur. Fixed assets are depreciated according to the straight-line method, assuming that the company's applicable income tax rate is 30%, and the weighted average cost of capital is 10%
Requirements : assess the feasibility of the project investment.

Answer rating: 100% (QA)

The project investment can be assessed based on the financial data provided The initial cost of the ... View the full answer