Robin Van, CEO of Evans Company, exports footballs globally. He wants to introduce new related projects such as air pumps, boot bags, etc. over a 4-year time frame. The initial property, plant and equipment investment is $8.4 million, and the initial working capital is $1.1 million (recoverable). Depreciation is straight line over the 4 years. Revenues are expected to increase by $7.3 million pretax per year with costs rising by $3.5 million. The discount rate is 14% and the tax rate is 36%. Salvage Value of Equipment

Year 1 -5.6M Year 2 - 4.2 M Year3-3.1 M Year 4-0

1.What are the cash flows for each of the 4 years? 2.What is the NPV if the project is for the entire 4 years? 3 years? 2 years? 1 years? 3.What are the total cash flows if the project is abandoned after years 1, 2 or 3? 4.What is the optimal and worst investment strategic decision?

Answer rating: 100% (QA)

Investment Analysis for Evans Companys New Project Assumptions Initial investment84 million Property... View the full answer