Business, 02.08.2021 21:30 lindseysmith9522
Apix is considering coffee packaging as an additional diversification to its product line. Here’s information regarding the coffee packaging project:
Initial investment outlay of $40 million, consisting of $35 million for equipment and $5 million for net working capital (NWC) (plastic substrate and ink inventory); NWC recoverable in terminal year Project and equipment life: 5 years Sales: $27 million per year for five years Assume gross margin of 50% (exclusive of depreciation) Depreciation: Straight-line for tax purposes Selling, general, and administrative expenses: 10% of sales Tax rate: 35%
Assume a WACC of 10%.
Required:
a. Should the coffee packaging project be accepted? Why or why not? Compute the project’s IRR and NPV.
b. Do you believe that there was sufficient financial information to make a solid decision on what to do?
c. Was there further financial information that you required that was not provided to you?
d. What financial figure do you believe was the determinant to your decision and why?
e. How would you be able to apply this particular financial information to other situations?
f. Discuss risk methodologies used in capital budgeting.
Answers: 1
Business, 21.06.2019 21:30
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The master manufacturing company has just announced a tender offer for its own common stock. master is offering to buy up to 100% of the company's stock at $20 per share contingent on at least 64% of the outstanding shares being tendered. after the announcement of the offer, the stock closed on the nyse up 2.50 at $18.75. a customer has 100 shares of master stock in his cash account. the customer tells you that he wishes to "cash out" his position. you should recommend that the customer:
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Answers: 1
Apix is considering coffee packaging as an additional diversification to its product line. Here’s in...
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