Question: please solve IN EXCEL 5. American Fruit Co. is considering constructing a new plant to process frozen fruit juices. One plant would be capital intensive,
5. American Fruit Co. is considering constructing a new plant to process frozen fruit juices. One plant would be capital intensive, the other much more labor intensive. Although the final decision would hinge on the relative cost of capital versus labor in the northern 5.6 Summary and Conclusions 141 California area, management is curious about the behavior of the plants' return on assets during a typical business cycle. a. Given the following information, calculate the break-even point in units of production for the two plants. b. The economics department has prepared sales projections for three business scenarios: recession, normal, and recovery. Sales under each scenario are expected to be as follows: recession, 300,000 units; normal, 500,000 units; and recovery, 800,000 units. Calculate the return on assets for the two plants under these three scenarios. c. If the three scenarios are all equally likely, what will be the variance of the return on assets for plant 1? For plant 2? What would you advise American Fruit? 6. For the following project, the chief financial officer has prepared a set of certainty-equivalent factors to adjust the cash flows for the estimated risk. The cconomics department has also prepared a set of risk-adjusted interest rates at which to discount the project's cash flow. The
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