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accounts-A manufacturing company is thinking of launching a new product. The company expects to

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Question;A manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,5000,000 each year thereafter. Direct costs including labor and material will be 45% of sales. Indirect incremental costs are estimated at $95,000 a year. The project requires a new plant that will cost a total of $1,500,000, which will be depreciated straight line over the next 5 years. The new line will also require an additional net investment in inventory and receivables in the amount of $200,000.Assume there is no need for additional investment in building the land for the project. The firms marginal tax rate is 35%, and its cost of capital is 10%.To receive full credit on this assignment please show all work including formulas and calculations used to arrive at financial valuesAssignment guidelines:Using the information in the assignment description:Prepare a statement showing the incremental cash flows for this project over an 8 year period.Calculate the payback period (P/B) and the net present value (NPV) for the projectA double spaced word document of 2-3 pages that contains your calculation values, your complete calculations, any formulas that you used.?Do you think the project should be accepted? Why??Assume the company has a P/B (payback) policy of not accepting projects with life of over 3 years.If the project required additional investment in land and building, how would this affect your decision? Explain.

 

Paper#42948 | Written in 18-Jul-2015

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