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2 Parts: Part 1: What are the cash flows, NPV,...




2 Parts: Part 1: What are the cash flows, NPV, and IRR for the following financial scenario (see attached spreadsheet): ?Cost of Capital 5% Initial investment outlay of $20 million for equipment only ?Project and equipment life: 5 years ?Sales projected to be $12 million per year for 5 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% Part 2 (short answers only): You reach for your keyboard to make the following notes about the questions you want to address: ?Does the coffee packaging project maximize the firm?s value? ?Should the company undertake this project, the prior project, or both? ?What advice should I give to John Matthews and the board? ?How can I describe my assessment? ?Should the second project be accepted?


Paper#2835 | Written in 18-Jul-2015

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