Mini$-$Project Problem Statement: $($Mutually Exclusive Alternative Investments $-$ Developing Project Cash Flows

Economic details are set out below for the manufacture of several grades of the same chemical. Higher purities command a premium price, but costs are higher.

Common data:

Working Capital $=10\%$ of FCI

Depreciation $=$ Straight$-$Line Dep. With life of $7$

i$\_($m$)=0\mathrm{.}15$

Effective Tax Rate $=0\mathrm{.}25$

Start$-$up $=0\mathrm{.}0$

CHART WITH ALL THE INFORMATION IS IN PICTURE.

QUESTIONS FOR ABOVE INFORMATION:

i$)$ What are the product prices $\text{'}$X$\text{'}$ and $\text{'}$Y$\text{'}$ for processes A and B$?$

ii$)$ Prepare cash flow statements for both processes by including nondiscounted and discounted cash flows. Plot the cumulative nondiscounted and discounted cash flow diagrams to determine the conventional and discounted payback periods. Label each diagram properly.

iii$)$ Based on net present worth $($value$)$ analysis, which process should be selected? Why?

iv$)$ If the depreciation method was $5-$Year MACRS for Process A and $7-$Year MACRS for Process B$,$ which process should be selected based on NPW analysis?

v$)$ Which process would you choose if you used incremental ROI $($AROI$)$ as the criterion?

vi$)$ Determine whether we should choose process A or B$.$ What is incremental DCFRR $($ADCFRR$)?$

vii$)$ Perform before$-$tax breakeven analysis for both processes to determine the optimal production capacity.

DCFRR: Discounted Cash Flow Rate of Return im: Minimum effective interest rate $$: Incremental

THANK YOU! WILL GIVE GOOD REVIEWS IF ALL QUESTIONS ARE ANSWERED.