type: Individual Project Unit: Investment Valuation and Decision Making Due Date: Wed, 8/1/18 Deliverable Length: Completed worksheet https://class.ctuonline.edu/_layouts/MUSEViewer/MUSE.aspx?mid=11595800 Respond to the following scenario with your thoughts, ideas, and comments. Be substantive and clear, and use research to reinforce your ideas. Over lunch, you and Mary meet to discuss next steps with the expansion project. Do we have everything we need on sales and costs? you ask. It must be time to compute the net present value (NPV) and internal rate of return (IRR) of the Apix expansion project. We have the data from James and Luke regarding projected sales and costs, respectively, for the food packaging project, says Mary. It is feasible to project that we will receive a tax break from this implementation. I have information from our audit firm that indicates that future depreciation methods for taxes will be straight-line; however, the corporate rates will be reduced to 35% as we assumed in our weighted average cost of capital (WACC) calculation. That sounds good, you say. Right,” says Mary. “You can use a WACC of 10% for the computation of the NPV and comparison for IRR.” Ive got the information I need from Luke and James, you say. “Does this look right to you? Heres what they gave me, you say, as you hand a sheet of paper to Mary.Lets look at this now while were together, she says. The information you hand to Mary shows the following: Initial investment outlay of $30 million, consisting of $25 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: $25 million per year for five years Assume gross margin of 60% (exclusive of depreciation) Depreciation: Straight-line for tax purposes Selling, general, and administrative expenses: 10% of sales Tax rate: 35% You continue your conversation. It looks good, says Mary. Use this information from Luke and James to compute the cash flows for the project. No problem, you say. Then, compute NPV and IRR of the project using the Excel spreadsheet I sent earlier today, says Mary. Use the IRR financial function for the computation of IRR. Okay, you say. “Ill submit my Excel file showing the computation of cash flows, NPV, and IRR by the end of week so you can look at it over the weekend. Thanks, says Mary. Complete the above worksheet for this assignment. Please submit your assignment. For assistance with your assignment, please use your text, Web resources, and all course materials. Senario: Apix Printing, Inc. Apix Printing, Inc. is a private, domestic United States printer of periodicals, newspaper inserts, and advertising materials that accompany distributions of Sunday and weekday circulations of large metropolitan newspapers. The company, headed by chief executive officer (CEO) John Matthews, generates $450 million in revenues from three product lines (periodicals, inserts, and advertising) and has long-term contracts with several large U.S. retailers to produce weekly sales flyer inserts as well as metropolitan newspapers to produce Sunday magazine inserts and coupons. Its printing presses are characterized by offset print technology and are capable of high-capacity output; in addition, the company recently migrated to water-soluble inks, which considerably reduces manufacturing emissions. The companys executive team, employees, and above all, its vice president (VP) of Production, Luke Stewart, are committed to environmentally-sustainable manufacturing practices. Presently, the only substrate Apix uses is paper, specifically newsprint of various weights. Trim and waste are recycled in accordance with the companys sustainability commitment. Manufacturing divisions are geographically aligned with customers locations to minimize logistics costs and response time to customer requirements; however, a central…
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