Question
In: Finance
Jane is a project manager for Jackson Drinks Inc. She is evaluating the feasibility of project...
Jane is a project manager for Jackson Drinks Inc. She is evaluating the feasibility of project to construct a plant to produce a new health drink. She has the following information.
· Sales of 500,000 bottles/year with a price of $6/bottle.
· Variable cost per bottle is $3 per bottle.
· Fixed costs are $500,000 per year.
· Project life is 5 years.
· Initial Investment (cash outlay) is $2,000,000.
· Depreciation is $400,000/year.
· Additional net working capital of $1,000,000 required. Same for all periods.
· The firm’s required return is 16%.
· The tax rate is 30%.
a. What is the OCF in year 1 to year 5?
b. What is the (Free) Cash Flow in year 1 to year 5?
c. What is the NPV of the project? Should Jackson Drinks Inc. accept or reject the project?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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