Reference no: EM133113214
A company is introducing a product that can sell at: 10 USD per unit, it is estimated that the volume of sales to be made is 200,000 units the first year and for the following years an increase of 5% compared to the sales of the previous year, this during the useful life of the project, which is 4 years.
The company has two investment alternatives. 1st. Project A, and 2nd. Project B.
The cost distribution is as follows:
Variable costs from A: 400,000 to B: 200,000.
The fixed costs for A: are 725,000 while for B: they are 850,000.
Initial investment in project "A" is: 800,000 while for "B" it is: 1,400,000.
Additional info: The investment will have a capital cost of 15% and the ISR is 27%. the depreciation method used is the straight line according to the categories in force in the DGII.
a) Develop forecasted income statement with the data provided Then determine:
b) Recovery Period or Pay Back
c) Productivity Index
d) Net Present Value (NPV)
e) Develop capital investment budget (CAPEX) and select the most feasible project according to the indicators
Rubric: The correct forecast of the income statement will be evaluated, which must have exact correct values. The correct formulation of each of the indicators will be evaluated.
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