Calculate the additional funds needed

Assignment Help Accounting Basics

Reference no: EM132757176

Question: Calculate the additional funds needed: The current financial state is as follows:Current WACC = 18.7%

The CEO is concerned. Sales have been stagnating for the past several years. He has tasked the product development team to recommend several projects to reenergize sales.

Current Margins are 25%

Current Annual Sales are $104 million

Project 1 is a 6-year project. It will require the following investment:

New Equipment $750,000 expected life of 8 years.

Increase in net working capital NWC of $150,000

Expected COGS cost of 75%

Expected Profit Margin of 25%

The best case scenario is sales in year one will be $1,500,000 and increase by 8% from year 2 through year 5. Sales are expected to decline by 10% in year 6.

The worst case scenario is that sales in year one will be $1,100,000 and increase by 3% from year 2 through year 5. Sales are expected to decline by 15% in year 6.

At the end of year 6 it is expected the equipment will have a salvage value of $50,000. Also at the end of year 6 we will recover the $150,000 in NWC at the end of the project.

You have discussed financing with your bank. They are willing to provide funding but only in $100,000 increments.

Reference no: EM132757176

Questions Cloud

Achieve universal primary education : Identify and discuss three key challenges which will negatively impact or prevent attainment of this goal.

What extent does aristotle agree with parmenides : To what extent does Aristotle agree with Parmenides' arguments about the nature of reality and our epistemic access to it.

How much will White Corporation budget for labor in July : Each unit requires 0.10 direct labor-hours at a cost of $8.50 per direct labor-hour. How much will White Corporation budget for labor in July

Identify a procedure you could use to audit quick clean : Leeanne Harris is the director of Quick Clean Pty Ltd, family business that provides cleaning, identify a procedure you could use to audit Quick Clean's revenue

Calculate the additional funds needed : Calculate the additional funds needed: The current financial state is as follows: Current WACC = 18.7%. The CEO is concerned. Sales have been stagnating.

What are the assumptions of theory : 1. What are the assumptions of each theory? 2. What are the criticisms on each theory?

Several factors that have led to increased health care costs : What are several factors that have led to increased health care costs? What are the several of the efforts that have been attempted by payers to control costs?

Difference between growing annuity and growing perpetuity : Discuss the difference between a growing annuity and a growing perpetuity. Provide an example of each. Also explain the annuity transformation method

Identify the key assertion addressed by the test procedure : Provide an explanation as to why the conclusion reached is appropriate or inappropriate. Identify the key assertion addressed by the test procedure.

User Account

All Pages