got2bgeezy
New member
I'm working on this project and I need to find out the following information, any information will help. I have no idea where to even start. Thank you in advance!
What is the project’s NPV, IRR, MIRR, Payback?
In determining your answers to these questions prepare a pro forma income statement for each year. Calculate the operating cash flow. Finish your preliminary analysis by calculating the NPV using a WACC of 20%.
The following information is available for this project.
Tax rate is 34%.
Project X is a new audiophile grade speaker system. Marketing estimates sales of 500 units per year at a price of $10,000 per unit.
Variable costs per system will run about $5,000 per unit and the product will have a four year life.
Fixed costs for the project are going to be $610,000 per year. The investment in manufacturing equipment including warehousing equipment will be $1,100,000. The IRS determination is that the equipment is MACRS 7 Years.
In four years the equipment will have a salvage value of 50% of the original price.
Net Working capital will be an initial $900,000 and 30% of sales after the initial investment.
The MACRS percentages for 7 year assets are as follows; Year One 14.29%, Year Two 24.49%, Year Three 17.49%, and Year Four 12.49%.
Having arrived at your decision, would your decision be different if the Bush tax cuts were going to expire at the end on Year One and the new tax rate would be 42% for the remainder of the project? Why (what is the New NPV)?
If the Bush tax cuts expire and inflation is expected to be 4%, what would the new NPV be and the new IRR?
What is the project’s NPV, IRR, MIRR, Payback?
In determining your answers to these questions prepare a pro forma income statement for each year. Calculate the operating cash flow. Finish your preliminary analysis by calculating the NPV using a WACC of 20%.
The following information is available for this project.
Tax rate is 34%.
Project X is a new audiophile grade speaker system. Marketing estimates sales of 500 units per year at a price of $10,000 per unit.
Variable costs per system will run about $5,000 per unit and the product will have a four year life.
Fixed costs for the project are going to be $610,000 per year. The investment in manufacturing equipment including warehousing equipment will be $1,100,000. The IRS determination is that the equipment is MACRS 7 Years.
In four years the equipment will have a salvage value of 50% of the original price.
Net Working capital will be an initial $900,000 and 30% of sales after the initial investment.
The MACRS percentages for 7 year assets are as follows; Year One 14.29%, Year Two 24.49%, Year Three 17.49%, and Year Four 12.49%.
Having arrived at your decision, would your decision be different if the Bush tax cuts were going to expire at the end on Year One and the new tax rate would be 42% for the remainder of the project? Why (what is the New NPV)?
If the Bush tax cuts expire and inflation is expected to be 4%, what would the new NPV be and the new IRR?