Question: how do i work through this question? United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would require use of an

how do i work through this question?
how do i work through this question? United Pigpen is considering a

United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would require use of an existing warehouse, which is currently rented out to a neighboring firm. The next year's rental charge on the warehouse is $190.000, and thereafter, the rent is expected to grow in line with inflation at 4% a yeat. In addition to using the warehouse, the proposal envisages an investment in plant and equipment of $174 million. This could be depreciated for tax purposes straight-line over 10 years. However. Pigpen expects to terminate the project at the end of 8 years and to resell the plant and equipment in year 8 for $580.000. Finally, the project requires an immedlate investment in working capital of $440,000. Thereafter, working caplal is forecasted to be 10% of sales in each of years 1through 7 . Working capital will be run down to zero in year 8 when the project shuts down. Year 1 sales of hog feed are expected to be $6.00 million, and thereafter, sales are forecasted to grow by 5% a year, slightly faster than the inflation rate. Manufacturing costs are expected to be 90% of sales, and profits are subject to tax at 21%. The cost of capital is 12% What is the NPV of Plgpen's project? Note: Enter your answer in thousonds, not in millions, rounded to the nearest dollor

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