Question: please help!! Assignment Your firm has been hired as a finance consultant by Spartan Sprockets, Inc., who have decided to invest in a new sprocket

please help!!  please help!! Assignment Your firm has been hired as a finance
consultant by Spartan Sprockets, Inc., who have decided to invest in a

Assignment Your firm has been hired as a finance consultant by Spartan Sprockets, Inc., who have decided to invest in a new sprocket manufacturing system. The company has narrowed the available options down to 3: your job is to analyze the financial data for each system, and make a recommendation to Spartan Sprockets as to which system they should purchase The data that is common to each system is as follows Whichever of the new systems the company will purchase will require the construction of a new factory to house it. Anticipating that a new factory would be needed someday, the company spent 5,000,000 to acquire the necessary land in 2015 The factory will cost the company $10,000,000 to construct The total amount of the Initial Investment (don't include Net Working Capital in your Depreciation calculation) will be depreciated straight line to zero through the life of each project (pay attention to the life span of each individual project) Last year, the finance committee of Spartan Sprockets spent $50,000 on a fact-finding tour of Oshkosh, Wisconsin to look at a similar manufacturing system to those they are considering buying The company will need to spend $500,000 on infrastructure improvements in order to build the factory Over the past 2 years, the company has spent $150,000 on research and development to see whether a new system was needed The company's Tax Rate is 21% The company has assigned a required rate of Return for all of the systems of 10% Task 1: Discounted Cash Flow Analysis and NPV calculation (60 points) The data for each of the 3 systems the company is considering buying is given below. You will need to fill in the data on the answer sheet for each of the 2 scenarios given for each of the 3 systems, and compute each scenario's Net Present Value. Remember, the company will only be able to purchase one of these systems. Add the common data above to each scenario's specific data below System A Base Case: Purchase Price: $4,500,000 After-tax Salvage Value: $2,000,000 Net Working Capital Needed: $750,000, 50% of this will be recovered in the terminal year of the project. Annual Sales attributed to this system: $20,000,000 Total Costs: 80% of Sales This project is to be evaluated using a 5-year time frame Alternate Scenario: Assume Total Costs have risen to 80.25% of Sales There is a 50% chance that the base case will be accurate, and a 50% chance that the Alternate Scenario will occur

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!