Question: Please help with this quantitative problem Quantitative Problem: Sunshine Smoothies Company (SSC) manufactures and distributes smoothies. S5C is considering the development of a new line

Please help with this quantitative problem Quantitative Problem: Sunshine Smoothies Company (SSC)Please help with this quantitative problem

Quantitative Problem: Sunshine Smoothies Company (SSC) manufactures and distributes smoothies. S5C is considering the development of a new line of high-protein energy smoothies. SSC's CFO has collected the following information regarding the proposed project which is expected to last 3 years: . The project can be operated at the company's Charleston plant, which is currently vacant. .Th For tax purposes the equipment will be depreciated on a straight-line basis over 5 years. Thus, the firm's annual depreciation expense is $4,900,000/5- $980,000. The company plans to use the equipment for all 3 years of the project. Att-3 (which is the praject's last year of operation), the equipment is expected to be sold far $2,300,000 before taxes The project will require an increasa in nat perating working capital of aso ona at t-o. The cost of the v orking capital will be fully reco edat t 3 which s the projects last Year of peration - Expected high-protein energy smoathie sales are as follows: e project will require that the company spend 4.9 illion today (t-0) to pur chase additional equipment. Year ales 1 $2,400,000 7,850,000 3 3,500,000 The project's annual operating costs (excluding depreciation) are expected to be 60% of sales. The company's tax rate is 40%. The company is extremely profitable; so if any losses are incurred from the high-protein energy smoothie project they can be used to partially offset taxes paid on the company's other projects. (That is, assume that if there are any tax credits related to this project they can be used in the year they occur.) * The project has a WACC-10.0%. what is the project's expected NPV and IRR? Round your answers to 2 decimal places. Do not round your intermediate calculations. NPV IRR Should the firm accept the profect? 55C is considering another project: the introduction of a "weight loss" smoothie. The project would require a $3 million investment outlay today (t -0). The after-tax cash flows would depend on whether the "weight loss" smoothie is well received by consumers. There is a 40% chance that den and ill be good in which case the project wil produce after-tax cash flows of S2.2 million at me end of each of the next 3 years. There s a 60% chance that demand will be o n which case theater-ta cash ws wi be so 2 m for years. The project s skier than the fir s ot r pro e ts, so it has a WACC of 11%. The firm w know if the pr ect is success u after recer ng the cash flows the first year, and ter rece ng the st years cash flows it wil have the option to abandon the pro ct T the firm decides to abandon the project the company will not eceive any cash flows after t 1 but it will be able to se the assets related to the project for $2.3 million a er taxes at t 1 Assuming the company has an option to abandon the project, what is the expected NPV of the project today? Round your answer to 2 decimal places. Do not round your intermediate calculations. Use the values in "millions of dollars" to ascertain the answer millions of dollars

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