A16 D H 1 Your company is evaluating a new product and you are required to...

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A16 D H 1 Your company is evaluating a new product and you are required to provide a financial evaluation and recommendation 2 3 Marketing has given the following estimates: 4 Project Year 5 Unit Sales 3,000 2 5,000 3 6,000 4 6,500 5 6.000 6 5,000 7 4,000 8 3,000 6 Selling Price per Unit 5 1205 120 $ 120 $ 110 $ 110 5 110 $ 110 $ 110 7 8 Operations has given the following estimates 9 VMC 10 Fixed Mfg Costs 560 per unit each year $25,000 each year 11 Working capital required for this project: $20,000 is required up front; subsequent years is estimated to be 15% of $ sales 12 Cost of Machinery $800,000 13 Machine depreciated using 7-years MACRS table (provided on next tab) 14 Anticipate salvage value: 20% of original cost of machine 15 Prior to start-up and caused by the installation of the new machine, production will be disrupted causing the loss of 500 units selling for $50 with a VMC of $30 16 17 info from the CFO 18 Marginal tax rate 19 Required rate of return 21% 15% 20 Assume 0 inflation 21 22 She has asked you to calculate the following and asked for your recommendation, accept or reject the project 23 24 25 26 27 NPV IRR Payback Problem Assumptions Pomated toreadsheet Sheet Ready Accessiblity: Good to go x L M N Open recovered workbooks? Your recent changes were saved. Do you want to continue working CAPEX Example Unit VMC Fad Costs 11 Depreciation 18 NWC Rey 21 12 Total Cashew Can Cash Flow Payback 27 MPV 15% 28 10 C 35 MACKS 3 14298 2 24 ' S 892 7 23 " SAIN V A16 D H 1 Your company is evaluating a new product and you are required to provide a financial evaluation and recommendation 2 3 Marketing has given the following estimates: 4 Project Year 5 Unit Sales 3,000 2 5,000 3 6,000 4 6,500 5 6.000 6 5,000 7 4,000 8 3,000 6 Selling Price per Unit 5 1205 120 $ 120 $ 110 $ 110 5 110 $ 110 $ 110 7 8 Operations has given the following estimates 9 VMC 10 Fixed Mfg Costs 560 per unit each year $25,000 each year 11 Working capital required for this project: $20,000 is required up front; subsequent years is estimated to be 15% of $ sales 12 Cost of Machinery $800,000 13 Machine depreciated using 7-years MACRS table (provided on next tab) 14 Anticipate salvage value: 20% of original cost of machine 15 Prior to start-up and caused by the installation of the new machine, production will be disrupted causing the loss of 500 units selling for $50 with a VMC of $30 16 17 info from the CFO 18 Marginal tax rate 19 Required rate of return 21% 15% 20 Assume 0 inflation 21 22 She has asked you to calculate the following and asked for your recommendation, accept or reject the project 23 24 25 26 27 NPV IRR Payback Problem Assumptions Pomated toreadsheet Sheet Ready Accessiblity: Good to go x L M N Open recovered workbooks? Your recent changes were saved. Do you want to continue working CAPEX Example Unit VMC Fad Costs 11 Depreciation 18 NWC Rey 21 12 Total Cashew Can Cash Flow Payback 27 MPV 15% 28 10 C 35 MACKS 3 14298 2 24 ' S 892 7 23 " SAIN V