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 category and $1,500,000 distributively year on that pointafter. manoeuvre equals including labor and materials give be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project requires a new plant that will cost a enume charge per unit of $1,000,000, which will be depreciated rightful(a) billet everywhere the next five dollar bill years. The new line will also require an extra send away enthronement in inventory and receivables in the make out of $200,000. delineate there is no need for additional coronation in build and demesne for the project. The firms marginal tax rate 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 everywhere an 8-year period. 2. Calculate the payback Period (P/B) and the NPV for the project. 3. Based on your make 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 trio years. 4. If the project c totally 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 overture calculations.

-Initial investment: The total initial investment (I) is the sum of coin invested in plant and equipment. I = $1,000,000 -Working Capital: The additional net investment in in! ventory and receivables is the working capital compulsory 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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