Reference no: EM132977651
Question - Crystal Investments wants to decide between two investments. The first is a flour mill which will require an investment of 10,000,000 in land, plants and equipment. The mill expects to make $6,000,000 in revenue in the first year and this is expected to grow at the rate of 3% per annum till the end of the tenth year. All costs were estimated to be $2,000,000 in the first but will grow at the rate of 4% until the end of the investment horizon which is in the tenth year. Working capital is $1,200,000 which will be returned at the end of the investment horizon. The company's weighted average cost of capital is 5%. Depreciation is $1,000,000 per year. The second investment is a textile factory that generates a revenue of $15,000,000 at a cost of $8,500,000 per year. Due to recent automation in the factory, costs were expected to be reduced by 5% from the 3rd year but by this same time, revenue will also be dropping to $10,000,000 till the end of the investment horizon. Depreciation is $2,000,000 per year and working capital of $7,000,000. The weighted average cost of capital for the factory is 12%.
1. Which project should Crystal choose?
2. What will happen if the cost of capital changes by 5% upward and downward?
3. Prepare report based on the above results to the management of Crystal Investments using graphs of the sensitivity analysis in 2 and other relevant information to convince them about the prospects of the projects and the one to choose.
|
What would the revised total commitments be
: If the company processed data in real time this might change things, what would the revised Total Commitments be? Would credit be granted or denied
|
|
Calculate total variable costs and total fixed costs
: The Wantu Hotel, a luxurious hospitality establishment, sold 145,000 rooms in a given year. Calculate Total Variable Costs and Total Fixed Costs
|
|
How many Standards would Waterway sell at break-even point
: Waterway Industries has a weighted-average unit contribution margin of $30 for its two products, How many Standards would Waterway sell at break-even point
|
|
Discuss the concepts of hypothesis testing
: Discuss the concepts of hypothesis testing, including what you are evaluating, when it should be used, and the differences between a one- and a two-tailed test
|
|
Prepare report based on the above results
: Prepare report based on the above results to the management of Crystal Investments using graphs of the sensitivity analysis in 2 and other relevant information
|
|
Was napster responsible for the actions of users and why
: Explain Why did the court find in favor of Diamond in the Rio case? What was the 1984 Sony Supreme Court case about? What is Digital Rights Management?
|
|
Briefly define operations scheduling techniques
: Briefly define operations scheduling techniques, layout planning, work system processes and inventory management policies.
|
|
Determine the consolidated retained earnings as of December
: MICHAEL Company acquired 80% of the outstanding shares of MARK Company on July 1, 2019 for P800,000. Determine the consolidated retained earnings as of December
|
|
Why did copyright laws become stricter and more punishing
: What is the Fair Use doctrine? Why did copyright laws become stricter and more punishing in the late 20th century? Why is intellectual property entitled?
|