Discuss risk methodologies used in capital budgeting

Assignment Help HR Management

Reference no: EM133465235

Case Study: Apix is considering coffee packaging as an additional diversification to its product line. Here's information regarding the coffee packaging project:

Initial investment outlay of $40 million, consisting of $35 million for equipment and $5 million for net working capital (NWC) (plastic substrate and ink inventory); NWC recoverable in terminal year
Project and equipment life: 5 years
Sales: $27 million per year for five years
Assume gross margin of 50% (exclusive of depreciation)
Depreciation: Straight-line for tax purposes
Selling, general, and administrative expenses: 10% of sales
Tax rate: 35%
Assume a WACC of 10%.

6 slides. 100-150 speaker notes.

Should the coffee packaging project be accepted? Why or why not? Compute the project's IRR and NPV.

In addition, answer the following questions:

Question 1: Do you believe that there was sufficient financial information to make a solid decision on what to do?

Question 2: Was there further financial information that you required that was not provided to you?

Question 3: What financial figure do you believe was the determinant to your decision and why?

Question 4: How would you be able to apply this particular financial information to other situations?

Question 5: Discuss risk methodologies used in capital budgeting.

Reference no: EM133465235

Questions Cloud

How might the lessons you have learned positively affect : Discuss how you can apply the concepts learned in international Human resources to your current or future career. How might the lessons you have learned

Describe capital structure and define marginal cost : Describe capital structure. - Determine the WACC given the above assumptions. - how these might be useful to determine the feasibility of the capital project.

Discuss about social psychology : Please explain your answer, making specific reference to the ideas about social psychology that we have discussed this term.

Explain why firms choose to decentralize and give an example : Explain why firms choose to decentralize and give an example. Why would managers continue to use IRR to choose among mutually exclusive projects?

Discuss risk methodologies used in capital budgeting : Do you believe that there was sufficient financial information to make a solid decision on what to do? - What financial figure do you believe was

Pros and cons of leveraging blockchain for process billing : What are the pros and Cons of leveraging blockchain for process billing (interoperability)?

Vacant judge position : Can a person interviewed for the vacant judge position but who is not ultimately appointed can bring a legal challenge

Identify the type of service system used in the company : Identify the type(s) of service system used in the company or a certain part of the company.

Demonstrate academic research skills in providing : demonstrate academic research skills in providing an analysis of and recommendations for managing this issue (including providing an accurate

User Account

All Pages