Question
In: Finance
Shrieves Casting Company is considering adding a new line to its product mix, and the capital...
Shrieves Casting Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Sidney Johnson, a recently graduated MBA. The cost of new machinery for the new product line would be $644,000. The machinery has economic life of eight years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the machine. The new line would generate incremental sales of 70,000 units per year at variable cost per unit of $21 and fixed cost of $725,000 per year. Each unit can be sold for $37 in the first year. The sale price and cost are both expected to remain the same. The firm’s tax rate is 35 percent, and the rate of return required for this type of investment is 15 percent. Calculate the base-case cash flow and NPV.
Solutions
Expert Solution
Calculate the base case cash flow and NPV as follows:
Formulas:
jeff jeffy answered 8 months agoRelated Solutions
Shrieves Casting Company is considering adding a new line to its product mix, and the capital...
Shrieves Casting Company is considering adding a new line to its
product mix, and the capital budgeting analysis is being conducted
by Sidney Johnson, a recently graduated MBA. The production line
would be set up in unused space in Shrieves’ main plant. The
machinery’s invoice price would be approximately $200,000, another
$10,000 in shipping charges would be required, and it would cost an
additional $30,000 to install the equipment. The machinery has an
economic life of 4 years, and Shrieves...
Shrieves Casting Company is considering adding a new line to its product mix, and the capital...
Shrieves Casting Company is considering adding a new line to its
product mix, and the capital
budgeting analysis is being conducted by Sidney Johnson, a
recent business school graduate.
The production line would be set up in unused space in
Shrieves's main plant. The machinery's
invoice price would be approximately $200,000, another $10,000
in shipping charges would be
required, and it would cost an additional $30,000 to install the
equipment. The machinery has
an economic life of 4 years and...
Shrieves Casting Company is considering adding a new line to its product mix, and the capital...
Shrieves Casting Company is considering adding a new line to its
product mix, and the capital
budgeting analysis is being conducted by Sidney Johnson, a
recent business school graduate.
The production line would be set up in unused space in
Shrieves's main plant. The machinery's
invoice price would be approximately $200,000, another $10,000
in shipping charges would be
required, and it would cost an additional $30,000 to install the
equipment. The machinery has
an economic life of 4 years and...
Shrieves Casting Company is considering adding a new line to its product mix, and the capital...
Shrieves Casting Company is considering adding a new line to its
product mix, and the capital budgeting analysis is being conducted
by Sidney Johnson, a recently graduated MBA. The production line
would be set up in unused space in the main plant. The machinery’s
invoice price would be approximately $200,000, another $10,000 in
shipping charges would be required, and it would cost an additional
$30,000 to install the equip- ment. The machinery has an economic
life of 4 years, and...
Shrieves Casting Company is considering adding a new line to its product mix, and the capital...
Shrieves Casting Company is considering adding a new line to its
product mix, and the capital budgeting analysis is being conducted
by Sidney Johnson, a recently graduated MBA. The cost of new
machinery for the new product line would be $644,000. The machinery
has economic life of eight years, and has no salvage value. Assume
that depreciation is straight-line to zero over the life of the
machine. The new line would generate incremental sales of 70,000
units per year at...
Shrieves Casting Company is considering adding a new line to its product mix, and the capital...
Shrieves Casting Company is considering adding a new line to its
product mix, and the capital budgeting analysis is being conducted
by Sidney Johnson, a recently graduated MBA. The cost of new
machinery for the new product line would be $644,000. The machinery
has economic life of eight years, and has no salvage value. Assume
that depreciation is straight-line to zero over the life of the
machine. The new line would generate incremental sales of 70,000
units per year at...
Shrieves Casting Company is considering adding a new line to its product mix, and the company...
Shrieves Casting Company is considering adding a new line to its
product mix, and the company hires you, a recently business school
graduate, to conduct capital budgeting analysis. The production
line would be set up in unused space in Shrieves' main plant. The
machinery’s invoice price would be approximately $200,000; another
$10,000 in shipping charges would be required; and it would cost an
additional $30,000 to install the equipment. The machinery has an
economic life of 4 years, and would...
Shrieves Casting Company is considering adding a new line to its product mix, and the company...
Shrieves Casting Company is considering adding a new line to its
product mix, and the company hires you to conduct capital budgeting
analysis. The production line would be set up in unused space in
Shrieves' main plant. The machinery’s invoice price would be
approximately $200,000; another $10,000 in shipping charges would
be required; and it would cost an additional $30,000 to install the
equipment. The machinery has an economic life of 4 years, and would
be a class 8 with...
Shrieves Casting Company is considering adding a new line to its product mix, and the company...
Shrieves Casting Company is considering adding a new line to its
product mix, and the company hires you, a recently business school
graduate, to conduct capital budgeting analysis. The production
line would be set up in unused space in Shrieves' main plant. The
machinery’s invoice price would be approximately $200,000; another
$10,000 in shipping charges would be required; and it would cost an
additional $30,000 to install the equipment. The machinery has an
economic life of 4 years, and would...
Shrieves Casting Company is considering adding a new line to its product mix, and the company...
Shrieves Casting Company is considering adding a new line to its
product mix, and the company hires you, a recently business school
graduate, to conduct capital budgeting analysis. The production
line would be set up in unused space in Shrieves' main plant. The
machinery’s invoice price would be approximately $200,000; another
$10,000 in shipping charges would be required; and it would cost an
additional $30,000 to install the equipment. The machinery has an
economic life of 4 years, and would...
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