JD Sdn Bhd has developed a new industrial detergent that can be used in motor vehicle garages.
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Question:
JD Sdn Bhd has developed a new industrial detergent that can be used in motor
vehicle garages. It would cost RM million to buy the equipment necessary to manufacture
the blenders, and initially, it would require net operating working capital equal to of the
st year sales amount. Net operating working capital will remain at the same rate. The
project would have a life of years. If the project is undertaken, it must be continued for the
entire years.
The firm believes it could sell units per year. The detergents would sell for RM per unit.
After the first year, JD intends to increase the sales price by annually.
The variable cost is RM per unit and will increase at an inflation rate of The
companys fixed costs would be RM at Year and would also increase at a rate of
annually.
The equipment would be depreciated over a year period, using the straightline method.
The annual depreciation will be calculated based on a salvage value of the equipment at the
end of the projects year life of RM The company, however, estimated the machine
can be sold as scrap for RM The corporate tax rate is
The cost of capital is
a Develop a spreadsheet model and use it to find the projects NPV IRR, and payback
Related Book For
Financial management theory and practice
ISBN: 978-1439078099
13th edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt
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