Most prominently, HCL market share and revenues have substantially decreased with the demand of its product and

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Question:

Most prominently, HCL market share and revenues have substantially decreased with the demand of its product and low level not seen in the past.

HCL is currently developing strategies and comparing different options to cope with the change and preparing for what may come next.

Marketing 10 Years plan in which

Sales will increase – 3000 per unit

Cash Expense will increase – 50,000

Acquisition of a small regional warehouse facility would cost $600,000

10 Years life – SLM Dep

HCL production manager has produced estimates for the cost associated with the manufacturing of the product.

Variable Cost - $200 per unit

Selling Price - $260 per unit

These prices will remain Same for 10 years

Cost savings Due to the acquisition of new facility $109,000 per year

To evaluate this project company, need to know the cost of capital, use cost of capital of similar nature company.

Tax Rate 30%

Company's liability amount to 60% of total assets.

Ignore change in working capital

HCL must liquidate some investments to meet borrowing requirements. the company on two type of investments which can be sold

Funding options

Bond with face value of 1000, 10 years to maturity, $50 coupon, YTM 3%, CMP $1100
Face of company XYZ we just paid a dividend of $0.50 per share. dividend growth 4% per year, required rate of return 8%, current market price $14.

Working as the company's CFO you have been asked to assist the evil plan and presenting your recommendation to the board of directors.

Question need to answer.

Based on the forecasted increase in sales, it is possible for HCL to achieve the corresponding gas and accounting break-even point? Based on your calculations for each - is the marketing Department proposal acceptable? explain.
Calculate the weighted average cost of capital of HCL using available in formation of a representative company of your choice (eg Harvey Norman).

For cost of equity – use beta of representative company, get the 10 year yield on government debt to estimate of risk free rate.

For cost of debt – Use the same process.

Use payback, NPV, and IRR to assess whether the investment in the warehouse facility is warranted. use our payback cut off period of five years for the evaluation of the payback period, And use WACC calculated in question 2 as the discount rate to calculate NPV. Also, please compare the three capital budgeting criteria and discuss which one is better for decision-making.
Which investment should HCL sale to raise necessary funds? explain the reason behind your decision
Based on the answers to the previous questions, determine whether to indorse the plant suggested by marketing. Then discuss potential suggestions on how to improve the plan.
Discuss the limitation of the above analysis.