CSL is considering the expansion of its COVID-19 vaccine production due to high demand. The new...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
CSL is considering the expansion of its COVID-19 vaccine production due to high demand. The new production facility is expected to cost $300 million and will be ready for production immediately. CSL predicts that the pandemic will end after another 3 years, and there will be no more demand for the COVID-19 vaccine. However, CSL will be able to sell the production facility to a flu vaccine company for $120 million after 3 years. The following income statements summarise the forecast for the COVID-19 vaccine production: Sales Costs (including depreciation) Profit before tax 1st year ($m) 150 110 40 2nd year ($m) 3rd year ($m) 120 80 90 60 30 20 Depreciation has been calculated on a straight-line basis. You should assume that all cash flows occur at the end of the year in which they arise. The company's cost of capital is 10%. Ignore taxation. a. Calculate the NPV for this project. Should the company invest? Why? b. Without calculation, is the internal rate of return (IRR) higher or lower than 10%? Explain briefly CSL is considering the expansion of its COVID-19 vaccine production due to high demand. The new production facility is expected to cost $300 million and will be ready for production immediately. CSL predicts that the pandemic will end after another 3 years, and there will be no more demand for the COVID-19 vaccine. However, CSL will be able to sell the production facility to a flu vaccine company for $120 million after 3 years. The following income statements summarise the forecast for the COVID-19 vaccine production: Sales Costs (including depreciation) Profit before tax 1st year ($m) 150 110 40 2nd year ($m) 3rd year ($m) 120 80 90 60 30 20 Depreciation has been calculated on a straight-line basis. You should assume that all cash flows occur at the end of the year in which they arise. The company's cost of capital is 10%. Ignore taxation. a. Calculate the NPV for this project. Should the company invest? Why? b. Without calculation, is the internal rate of return (IRR) higher or lower than 10%? Explain briefly
Expert Answer:
Related Book For
Posted Date:
Students also viewed these finance questions
-
Let X and Y be independent continuous random variables with respective hazard rate functions X(t) and Y(t), and set W = min(X,Y). (a) Determine the distribution function of W in terms of those of X...
-
Let X and Y be independent random variables with the same geometric distribution. (a) Show that U and V are independent, where U and V are defined by U = min(X, Y) and V = X - Y, (b) Find the...
-
Let X,X, be two independent continuous random variables with the common probability density function e 2 for 0
-
Which of the following statements about Visa credit card sales is incorrect? (a) The credit card issuer makes the credit investigation of the customer. (b) The retailer is not involved in the...
-
(a) Use crystal field theory to describe a high-spin octahedral complex of Fe2+. (b) Do the same for a low-spin complex.
-
On April 22, which stock(s) had a 52-week high that was approximately 30% higher than the 52-week low?
-
Pilot Company had operating expense of \(\$ 40,000\). At the beginning of the year, Pilot owed \(\$ 8,000\) on accrued liabilities. At year-end, accrued liabilities were \(\$ 4,000\). How much cash...
-
Wells Company reports the following sales forecast: September, $ 55,000; October, $ 66,000; and November, $ 80,000. All sales are on account. Collections of credit sales are received as follows: 20%...
-
Find the least common denominator (LCD) of the rational expressions 7 8 1) -and- 12x 15x 5 2) and 7 x-3 3 11 3) -and- x+7x+12 x+6x+9 6 4) 4 and a+1 (a+1)
-
3. [10 points] - A rod of mass m, length L and centroidal moment of inertia Ic = mL is pinned at one end O. At the other end of the rod a small spherical particle of mass m is attached. The rod is...
-
Calculate ending receivables assuming opening receivables were $150,000 and sales and collections for the year were $600,000 and $580,000 respectively. Calculate amount collected if sales were...
-
The market has been divided into two period from 1960s-2000 Republican versus Democrat months Make sure calculations are in the same units: Percentages or decimals Compute the following risk...
-
5) Convert the following message to Hexadecimal values. (Leave spaces between each value.) Work super hard and BELIEVE in yourself! Message in Hexadecimal (10 points):
-
Omega Co. has annual sales of $250,000, costs of goods sold of $168,000, and assets of $322,000. Accounts receivable are $86,200. What is the receivables turnover?
-
Problem 2: Aggregate Savings and Labour Supply with a Bequest Motive Consider the following consumer's problem: max U = +1 +2 +y+0+=1, 0
-
What does this code do? Comparator sortByYearDescTitle (b1, b2)->b2.getPublication Year() bl.getPublication Year() == 0 ?bl.getTitle().compareTo (b2.getTitle()) : b2.get Publication Year()...
-
On January 1 2 , 2 0 2 3 , Desmond Doss a professional engineer, moved from Toronto to Kingston to begin employment with Camden Ltd . , a large public corporation. Because of his new employment...
-
Modify the counter from Exercise 5.44 such that the counter will either increment by 4 or load a new 32-bit value, D, on each clock edge, depending on a control signal Load. When Load = 1, the...
-
Consider an urn containing n balls numbered 1, . . . , n, and suppose that k of them are randomly withdrawn. Let Xi equal 1 if ball number i is removed and let Xi be 0 otherwise. Show that X1, . . ....
-
The random vector (X, Y) is said to be uniformly distributed over a region R in the plane if, for some constant c, its joint density is (a) Show that 1/c = area of region R. Suppose that (X, Y) is...
-
Find the probability density function of Y = eX when X is normally distributed with parameters and 2. The random variable Y is said to have a lognormal distribution (since log Y has a normal...
-
State the main audit objectives for (1) sales transactions and (2) debtors balances.
-
What are the major files and printed outputs of computerised processing for sales transactions?
-
What is the sequence of steps normally associated with processing of credit sales? For each step, identify one control.
Study smarter with the SolutionInn App