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Based on the inputs below prepare a capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return and Profitability Index determining whether the project is feasible. Please show your spreadsheet calculations and your final determinations of “go” or “no go” on the project.Project Inputs:WACC – the cost of capital (hurdle rate) will be the current yield of the 10 Year U.S. Treasury Note: as of Friday July 18 2014 the yield was 2.54%, plus 630 basis points.Project Investment Outlay, Year 0 - $500,000 Project Investment Life – 10 yearsProject Depreciation - $50,000 / yearProject Salvage Value - $20,000Working Capital Base of Annual Sales – 10%Expected inflation rate per year, Selling Price Per Unit – 5%Expected inflation rate per year, Manufacturing Cost per unit – 3.5% Expected inflation rate per year, Fixed operating costs per year – 2.5% Project Tax Rate – 30%??Bus 530 Case 3: HasseInputs continued:Units sold per year – 20,000Selling Price per Unit, Year 1 - $75Fixed operating costs per year excluding depreciation - $250,000 Manufacturing costs per unit, Year 1 - $33.75Scenario Analysis:Base Case Scenario – 20,000 units sold per year – 57% probability Worst Case Scenario – 10,000 units sold per year – 25% probability Best Case Scenario – 30,000 units solder per year – 18% probabilityPrepare a scenario analysis once you have completed your original discounted cash flow analysis. Is the project still a “go” or “no go”?Sensitivity Analysis:In addition to the above, also prepare a sensitivity analysis based on the following variables –Deviation from the Base: -20%, -10%, 0%, +10%, +20%Sensitivity Variables: (1). Selling Price per Unit, (2). Manufacturing Cost per Unit, (3). Depreciation.Please show the range in the NPVs for each variable and chart the analysis. Which variable has the highest risk and which variable has the lowest risk? Explain.
Summarised views of the concept and the solutions found in The Goal to solve or alleviate the company
A company's capital structure represents their view on leverage. With corporate taxes, discuss and explain why a company's value can be higher with leverage even though its earnings are lower.
Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.
According to the international Fisher effect, if U.S. investors expect a 5% rate of domestic inflation over one year, and a 2% rate of inflation in Japan, and require a 3% real return on investments over one year
A company anticipates taxable cash receipt of $70,000 in year five of project. The company's tax rate is 30% and its discount rate is 12%. The present value of this future cash flow is closest to:
(a) Determine the annual net operating cash flows (OCF) generated by the machine. (b) What is the depreciation tax shield? c) Suppose the required rate of return is 12 percent, and the life of the project is 10 years. What is the project's NVP?
Returns for the Shields Corporation over the last three years are shown below. Calculate the standard deviation of Shields' returns?
How much gain should Hardin recognize on this exchange, and at what amount should the acquired computer be recorded, respectively?
Consumer Focus is a marketing research firm that organizes focus groups for consumer-product companies. A Consumer Focus staff member attends every session to ensure that all the logistical aspects run smoothly.
Pam Gregg is expecting cash flows of $50,000, $75,000, $125,000, and $250,000 from an inheritance over the next four years. If she can earn 11 percent on any investment that she makes, what is the present value of her inheritance? (Round to the ne..
Now you are approached by Studebaker Capital Corp., which proposes a fixed-price contract to supply raw materials at $10 million per year for 10 years.
Invester banker five enters into a best efforts arrangement to try and sell ten million shares of stock at $15.00 per share for Rogers Company. The investment banker five incurs expenses of $300,000 in floating the issue and the company incurs expens..
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