Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
You are an analyst in the corporate finance department of Pet Products, Inc. You have been asked to analyze a potential new product to be introduced. The beef-flavored water will be called "Meaty Drink." The beef flavouring will be artificial, of course, so as to not close the market to vegan pets. The entire project can be squeezed into a small portion of a warehouse already in use without detrimentally affecting other projects.
Your colleague in the research and development department sent along the following partial spreadsheet of project cash flows and levels to get you started in your analysis. Although you assume the numbers are accurate (at least, accurate conditionally based on your colleague's data and analysis) you suspect that you will have to make major adjustments the spreadsheet so that you can analyze a proper set of relevant incremental cash flows.
Item
Notes
t=0
t=l
t=2
t=3
t=4
t=5
t=6
Sales
All numbers are in millions; i.e., 250 means250 million.
250
Product testing
Sales estimates come from the marketing tests we completed last week; total costs of the testing were 12
12
Variable costs
23% of sales
57.5
Fixed costs
We have to charge the new project an allocation of our current and on-going electricity and rent costs; no other fixed operating costs.
10
New equipment
Purchase cost incurred immediately, but we cannot expense it; instead we will deduct the depreciation
100
Depreciation
Depreciated straight-line to zero over 10-yearaccounting life
Book value of assets
Start with initial cost and mark down by the depreciation
90
80
70
60
50
40
Resale of equipment
Estimate based on historical data; assumes project terminates at time 6
Taxes
Rate is 40% for income and capital gains; left calculating the levels for the analysts.
?
Net Working Capital
Assume we recapture all NWC at termination
99
Interest
Payments
We are going to finance the project with an equity issue, but our current interest payments on our debt are 200 per year; tax deduction makes the relevant cash flow200*40% = 80
Dividends
We are going to issue 100 worth of equity to finance the project; current dividend yield is 5%, so relevant cash flow is 5
5
In this type of system store balances are recorded and computed after all receipt and issue. The main focus of this system is to make obtainable details regarding the quantity and
As an investor, you are considering buying stock in a relatively new company. Medical Horizons, Inc., has been in existence for 10 years and is now about to go public. The first st
Generally Accepted Accounting Principles (GAAP) are guidelines for companies to follow as tehy prepare and issue financial statements. Let's start by getting an understanding of wh
Petition by creditor Any creditor including an assignee of a debt, may petition, provided: The debt due to him amounts to at least Shs 1,000; The debt is certain and i
What are features of branch accounts?
Jane makes a living renting expensive state of the art surveillance equipment to detectives and nervous spouses. Her average rental period is 27 days. The rental price includes all
What organizations are responsible for governing financial reporting? What is the role of each organization? How have the roles changed in the last 20 years? How might their roles
Q. What is Credit Analysis? Potential credit customers must be carefully screened using such methods as bank references, trade references, credit reports from credit reference
ACCUMULATION ACCOUNTS FOR MINORS (a) Income accumulations : When property is left in trust for minors, the income earned for the period will be divided equally or according t
Voluntary settlements The trustee can claim all property settled by the bankrupt on other persons within two years preceding the bankruptcy unless made: a. Before and in consi
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd