Question: Solve it on Excel sheet please!! B B D H K 1 2 3 4 Lectra Inc., is a media company that it is considering

 Solve it on Excel sheet please!! B B D H K

Solve it on Excel sheet please!!

B B D H K 1 2 3 4 Lectra Inc., is a media company that it is considering the expansion of its projects. The new project involves purchasing computer equipment budnled lifetime license for softwares that allows the company to expand the prodcution of content and sales of its media contents to its customers. This project is expected to last 5 years and then project will be terminated. The company uses the simplified straight-line method over 5 years. It is assumed that the equipment and license will recover salvage value, if any, at the termination of the project. 6 7 This project has the following working capital requirement: There will be an initial working capital requirement of $27,800 just to get the production started. For each year, the total investment in net working capital will equal 6.5% of the dollar value of sales for that year. All working capital is liquidated at the termination of the project at the termination year of the project. 10 11 Given the following information, determine the free cash flows associated with the project (tabulate your answer on a year by year basis), the project's net present value and the profitability 12 13 index. Apply the appropriate decision criteria. 14 15 Year 1 (Per unit) Year 2 (per unit) Year 3 (Per unit) Year 4 (per unit) Year 5 (Per unit) ) 16 Sales price per unit: $5,035 $5,035 $5,500 $5,500 $5,045 17 Variable cost per unit: $350 $350 $560 $560 $480 18 19 Annual fixed costs: $27,800 Cost of new plant and/or 20 equipment: $145,890 Shipping and installation 21 costs: $0 Salvage value at 22 termination: $58,500 23 24 Unit Sales: 25 Year 1 12 13 5 26 Unit Sold 5 12 21 21 15 27 28 Company's marginal 29 corporate tax rate: 28% Project's required rate of 30 retur: 11.75% 31 32 33 34 35 4 B B D H K 1 2 3 4 Lectra Inc., is a media company that it is considering the expansion of its projects. The new project involves purchasing computer equipment budnled lifetime license for softwares that allows the company to expand the prodcution of content and sales of its media contents to its customers. This project is expected to last 5 years and then project will be terminated. The company uses the simplified straight-line method over 5 years. It is assumed that the equipment and license will recover salvage value, if any, at the termination of the project. 6 7 This project has the following working capital requirement: There will be an initial working capital requirement of $27,800 just to get the production started. For each year, the total investment in net working capital will equal 6.5% of the dollar value of sales for that year. All working capital is liquidated at the termination of the project at the termination year of the project. 10 11 Given the following information, determine the free cash flows associated with the project (tabulate your answer on a year by year basis), the project's net present value and the profitability 12 13 index. Apply the appropriate decision criteria. 14 15 Year 1 (Per unit) Year 2 (per unit) Year 3 (Per unit) Year 4 (per unit) Year 5 (Per unit) ) 16 Sales price per unit: $5,035 $5,035 $5,500 $5,500 $5,045 17 Variable cost per unit: $350 $350 $560 $560 $480 18 19 Annual fixed costs: $27,800 Cost of new plant and/or 20 equipment: $145,890 Shipping and installation 21 costs: $0 Salvage value at 22 termination: $58,500 23 24 Unit Sales: 25 Year 1 12 13 5 26 Unit Sold 5 12 21 21 15 27 28 Company's marginal 29 corporate tax rate: 28% Project's required rate of 30 retur: 11.75% 31 32 33 34 35 4

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 Finance Questions!