Business, Financial Markets and Services
Year 4
Superior Manufacturing is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter
Superior Manufacturing is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project requires a new plant that will cost a total of $1,000,000, which will be depreciated straight line over the next five years. The new line will also require an additional net investment in inventory and receivables in the amount of $200,000. Assume there is no need for additional investment in building and land for the project. The firm's marginal tax rate is 35%, and its cost of capital is 10%. Based on this information you are to complete the following tasks.

Prepare a statement showing the incremental cash flows for this project over an 8-year period.

Calculate the Payback Period (P/B) and the NPV for the project.

Based on your answer for question 2, do you think the project should be accepted? Why? Assume Superior has a P/B (payback) policy of not accepting projects with life of over three years.

If the project required additional investment in land and building, how would this affect your decision? Explain.

A resource on financial functions in Excel is available in the Labs area. Click "Labs," then "Student Success Learning Lab." Click "Presentation Material" in the left navigation bar. Choose "Financial Functions" to download the file. When asked, be sure to click "Save," rather than "Open."

To receive full credit on this assignment, please show all work, including formulae and calculations used to arrive at financial values. Submit your work to your instructor via the drop box....

...so. (10 points) This strategy does not consider risk.
3. The NuPress Valet Company has an improved version of its hotel stand. The investment cost is expected to be 72 million dollars and will return 13.50 million dollars for 5 years in net cashflows. The ratio of debt to equity is 1 to 1. The cost of equity is 13%, the cost of debt is 9%, and the tax rate is 34%. What is the NPV of the project? (10 points)
WACC = .5*13+.5*9*(1-.34) = 9.47%
PMT =...

...budgeting? a Will an investment generate adequate cashflows to promptly recover its cost? b Will an investment generate an acceptable rate of return? c Will an investment have a positive net present value? d Will an investment have an adverse effect on the environment? 3 Which of the following is not considered when using the payback period to evaluate an investment? a The profitability of the investment over its entire life. b The annual net cash...

...Projecting CashFlow
Projecting cashflow is a vital aspect of managing a business. Cashflow covers expenses, which is why start-ups often seek financing or loans--to provide a base of capital to fund the business while waiting for cashflow. Here is how to project your cashflow.
Estimating the incrementalcash...

...or 3.03%
3. Consider the following monthly cashflows (see the diagram below):
X
Today
Z
X
Z
X
Z
1
2
3
4
19
20
Cashflows of an amount X are made for months 1, 3, 5, …, 17 and 19 (the ten oddnumbered months) and cashflows of an amount Z are made for months 2, 4, 6, …, 18
and 20 (the ten even-numbered months). The APR is 6% and is compounded on a
monthly basis....

...
Write Up: Mini Case ofChapter 10: The Basics of Capital Budgeting: Evaluation CashFlows
Oct 2, 2014
Executive Summary:
We heritage $1 million from our grandfather, and we just received our master degree in MBA, and because we love to be our own boss and, we don not have the skills to trade on the market, we decided to purchase an established franchise in the fast-food area to make some investments. We chose two franchises: L, Lisa’s Soups, Salads, & Stuff...

...The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project.
现金流入的现值和现金流出的现值之间的差额。 NPV是用在资本预算分析的投资或项目的盈利能力。
The net present value of a project is the present value of current and future benefit minus the present value of current and future costs.
一个项目的净现值是当前和未来的收益减去当前和未来成本的现值的现值。
Payback Period allows investors to assess the risk of an...

...Analyze company cashflows
East Coast Yachts has a strong operating cashflow highlighted by strong earnings before interest and taxes of $88,416,000. With the addition of $20,160,000 in depreciation and subtraction of $30,921,000 in taxes, they managed an operating cashflow of $77,654,400. East Coast Yachts appears to be in or approaching a growth mode with their capital spending on fixed assets...

...Free cashflow
In corporate finance, free cashflow (FCF) is cashflow available for distribution among all the securities holders of an organization. They include equity holders, debt holders, preferred stock holders, convertible security holders, and so on.
G. Bennett Stewart - the "economic model of value holds that share prices are determined by just two things: the cash to be generated...