Prepare a memorandum to the board on behalf of John

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Question - Cashew Inc is considering remodeling its facility for a total cost of $ 100,000,000. Bernard, the facility manager, reported that the cost savings would be $ 20,000,000 for the first five years and then $ 7,800,000 for the remaining three years. He indicated that the net cash flow on the project is in excess of $ 20,000,000. John, vice president and chief financial officer, was not in favor of the project. He argued that the payback period needs to be less than three quarters of the life of the project (6 years) and have a positive net present value of six percent.

1. Calculate the payback period.

2. Calculate the net present value.

3. Prepare a memorandum to the board on behalf of John. Be sure to include your numerical findings and other considerations you believe might be relevant.

Reference no: EM133112961

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