What expected project fcf for each of the next five years

Assignment Help Financial Accounting

Reference no: EM132797399

Masters Australia Pty Ltd (Masters) is considering to invest in a new product which will require an initial investment of $3,000,000. This capital will be depreciated over five years using straight-line depreciation toward a zero salvage value. Estimated selling price is $200 with variable cost of $75 per unit and fixed cost of $500,000 per year (not including depreciation). Year 1 sales quantity is expected to be 10,000 units which is estimated to be increased by 3% each year. This investment requires 2% additional working capital each year for the additional sales for years 1-4 and zero additional working capital investment for year 5.

Problem a) If Masters faces a 30% tax rate, what expected project FCFs for each of the next five years will result from the investment in new product?

Problem b) If Masters uses a 15% discount rate to analyze its investments, what is the project's NPV? Should the project be accepted? Why?

Problem c) What other two factors are needed to be considered in this investment analysis regardless of NPV?

Reference no: EM132797399

Questions Cloud

How do calculate the npv for project a : A firm has a WACC of 14.36% and is deciding between two mutually exclusive projects. Calculate the Payback Period for Project A

Compute for the carrying amount of accounts receivable : Compute for the carrying amount of accounts receivable on Dec. 3. sales returns and discounts (including 2,200 sales return on cash sales) 13,200

Compute the actual and applied overhead : Compute the actual and applied overhead using the company's predetermined overhead rate of $23.92 per machine hour

What abel gross margin would : If Abel changes its method of accounting for Yum's sales by showing the net amount as additional sales revenue, then Abel's gross margin would

What expected project fcf for each of the next five years : If Masters faces a 30% tax rate, what expected project FCFs for each of the next five years will result from the investment in new product?

What is the current price of the bonds : Today, the required return on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity

What is the prime cost for the period : What is the prime cost for the period? Production reports showed that 100,000 units of Product X were manufactured at labor costs of P550,000

What is the company break-even in amount or sales : What is the company's break-even in amount or sales? The company has no beginning or ending inventories. A total of 80,000 units were produced and sold.

What price should the bond trade? today : The yield on the bond issue is currently 6.05?%. At what price should this bond trade? today, assuming a face value of ?$1,000 and annual? coupons?

User Account

All Pages