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In: Accounting

At Little Green Apple Produce the owner is considering buying a new large walk in cooler...

At Little Green Apple Produce the owner is considering buying a new large walk in cooler for fruits and vegetables. The new cooler cost $150,000. The annual maintenance cost will be $7,000 starting in year two (the first year will be covered under warrantee). An additional employee will be needed to stock the cooler. The employee will make $16/hr, and start part-time at 20 hours per week. Sale of produce will increase by $100,000 in year one and an additional 10% in year two and 15% in year three. The cost of produce will increase $30,000 in year one and is variable with sales. The part-time employees hours will vary based on additional sales in years two and three. The employee will receive raises of 4% annually and electricity will increase 3% a year. There is no inflation on any other item.

Based on this information prepare a pro forma and calculate the project NPV using a 9% discount rate/hurdle rate and calculate the IRR. State if the project should be expected or rejected.

Please show all formulas on excel

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Expert Solution

ekkarill92 answered 2 years ago
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