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Assume that you are employed by a wood milling company that is evaluating the -only calculations




Question;Assume that you are employed by a wood milling company that is;evaluating the desirability of adding a new product to their product;mix. The product would require the addition of new and different CNC;(computer numerical control) milling equipment. Your boss has asked you;to analyze a project proposal and recommend whether the project should;be accepted or rejected. The most likely project estimates are:Unit selling price = $50Unit variable cost = $30Total fixed costs including depreciation = $300,000Expected sales = 30,000 units per yearThe;projects will last for 10 years and will require an initial investment;of $1 million, which will be depreciated straight-line over the project;life to a final value of zero. The firm?s tax rate is 35% and the;required rate of return is 12%.Your boss recognizes that some of;these estimates are subject to error and wants to better understand the;risks associated with the project and alternatives for dealing with;those risks. You have been asked to include a sensitivity analysis in;your report. You are also to explain how changing the discount rate;might be helpful.Your boss has heard about cash flow estimates;being biased for personal gain at the company?s expense in another firm;and would like to better understand that potential problem. You have;been asked to address that in your report.The team developing the;proposal estimated that variable cost and sales volume may each turn;out to be as much as 10% higher or 10% lower than the initial estimate.;To complete this assignment, you are to submit a four to five page paper;that includes the following:Using MS Excel:Calculate the project's NPV for the most likely results.Calculate the project's NPV for the best-case scenario.Calculate the project's NPV for the worst-case scenario.Calculate the project IRR for the most likely results.


Paper#51890 | Written in 18-Jul-2015

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