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 division and $1,500,000 distributively year on that pointafter. locate 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 agree of $1,000,000, which will be depreciated rightful(a) billet wholly everyplace the next quintette years. The new line will also require an supernumerary plunder investment in inventory and receivables in the join of $200,000. nominate there is no need for additional coronation in build and primer coat for the project. The firms marginal tax send 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 over an 8-year period. 2. Cal culate the payback Period (P/B) and the NPV for the project. 3. Based on your come for question 2, do you think the project should be authorized? Why? Assume Superior has a P/B (payback) policy of not accepting projects with life of over collar years. 4. If the project call 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 antecedent calculations.
-Initial investment: The total initial investment (I) is the sum of capital invested in plant and equipment. I = $1,000,000 -Working Capital: The addi tional net investment in inventory and recei! vables is the working capital infallible 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:
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