Suppose we think we can sell 89405 boxes per year at a price of $9 per box. It costs us about $5.6 per box. The life time of this project is three-year life. We require a 15 percent return on new products. Fixed costs will run $24226 per year. Further, we will need to invest a total of $105000 in manufacturing equipment which will be depreciated using straight line method. Furthermore, the cost of removing the equipment will roughly equal its actual value in three years, so it will be essentially worthless on a market value basis as well. Finally, the project will require an initial $10000 investment in net working capital, and the tax rate is 36 percent. - Calculate the CFFA, use Excel in your solution

Suppose we think we can sell 89405 boxes per year at a price of $9 per box. It costs us about $5.6 per box. The life time of this project is three-year life. We require a 15 percent return on new products. Fixed costs will run $24226 per year. Further, we will need to invest a total of $105000 in manufacturing equipment which will be depreciated using straight line method. Furthermore, the cost of removing the equipment will roughly equal its actual value in three years, so it will be essentially worthless on a market value basis as well. Finally, the project will require an initial $10000 investment in net working capital, and the tax rate is 36 percent. - Calculate the CFFA, use Excel in your solution

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 14P

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