Financial Management

Background History Superior Manufacturing is thinking of launching a new product. The company expects to contend $950,000 of the new product in the first class and $1,500,000 distributively year on that pointafter. manoeuvre equals including labor and materials give be 55% of sales. Indirect additive costs are estimated at $80,000 a year. The project requires a new plant that will cost a full(a) of $1,000,000, which will be depreciated rightful(a) billet everyplace the next quint years. The new line will also require an supererogatory gain investment in inventory and receivables in the make sense of $200,000. constrict there is no need for additional coronation in build and knowledge base for the project. The firms marginal tax run is 35%, and its cost of capital is 10%. Based on this information you are to complete the following tasks. 1. Prepare a statement presentation the incremental cash flows for this project oer an 8-year period. 2. Calculat e the payback Period (P/B) and the NPV for the project. 3. Based on your solve for question 2, do you think the project should be evaluate? Why? Assume Superior has a P/B (payback) policy of not accepting projects with life of over trey years. 4. If the project c wholly for additional investment in land and building, how would this affect your close? Explain. Answer Question 1. First of all we need to order the data and do some prelim calculations. -Initial investment: The total initial investment (I) is the sum of bullion invested in plant and equipment. I = $1,000,000 -Working Capital: The additional net investment in inventory and receivables is the working capital needful for the project: WC = $200,000 assuming that it will not change over the projects life. whence Working Capital Change for each year Yi is: ChWCi = old Year WC - Current WC = 0 (i=1... If you want to get a full essay, order it on our website: BestEssayCheap.com

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