Question: Need Help finding out the numbers in the empty cells. Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750.
Need Help finding out the numbers in the empty cells.
Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.79 million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $49,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: - Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $10.15 million per year in additional sales, which will continue for the 10-year life of the machine. - Operations: The disruption caused by the installation will decrease sales by $5.05 million this year. As with Billingham's existing products, the cost of goods for the products produced by the XC- 750 is expected to be 70% of their sale price. The increased production will also require increased inventory on hand of $1.19 million during the life of the project, including year 0 . - Human Resources: The expansion will require additional sales and administrative personnel at a cost of $1.94 million per year. - Accounting: The XC-750 will be depreciated via the straight-line method over the 10-year life of the machine. The firm expects receivables from the new sales to be 14% of revenues and payables to be 11% of the cost of goods sold. Billingham's marginal corporate tax rate is 21%. a. Determine the incremental earnings from the purchase of the XC-750. b. Determine the free cash flow from the purchase of the XC-750. b. Determine the free cash flow from the purchase of the XC-750. Calculate the free cash flow from the purchase of the XC-750 below (with vs. without XC?750 ): (Note: the change in net working capital for year 0 is equal to the sum of the change in accounts receivable due to the decrease in sales, the change in inventory due to the increase in inventory starting in year 0 , and the change in accounts payable due to the decrease in cost of goods sold.) (Round to the nearest dollar.) Incremental Effects (with ys, without XC-750) Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.79 million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $49,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: - Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $10.15 million per year in additional sales, which will continue for the 10-year life of the machine. - Operations: The disruption caused by the installation will decrease sales by $5.05 million this year. As with Billingham's existing products, the cost of goods for the products produced by the XC- 750 is expected to be 70% of their sale price. The increased production will also require increased inventory on hand of $1.19 million during the life of the project, including year 0 . - Human Resources: The expansion will require additional sales and administrative personnel at a cost of $1.94 million per year. - Accounting: The XC-750 will be depreciated via the straight-line method over the 10-year life of the machine. The firm expects receivables from the new sales to be 14% of revenues and payables to be 11% of the cost of goods sold. Billingham's marginal corporate tax rate is 21%. a. Determine the incremental earnings from the purchase of the XC-750. b. Determine the free cash flow from the purchase of the XC-750. b. Determine the free cash flow from the purchase of the XC-750. Calculate the free cash flow from the purchase of the XC-750 below (with vs. without XC?750 ): (Note: the change in net working capital for year 0 is equal to the sum of the change in accounts receivable due to the decrease in sales, the change in inventory due to the increase in inventory starting in year 0 , and the change in accounts payable due to the decrease in cost of goods sold.) (Round to the nearest dollar.) Incremental Effects (with ys, without XC-750)
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