Maintenance costs are expected to be $2,700 per year and increase by 3% in Year 6 and remain at that rate.

Materials in Year 1 are estimated to be $15,000 but remain constant at $10,000 per year for the remaining years.

Labor is estimated to start at $70,000 in Year 1, increasing by 3% each year after.

Year 1Year 2Year 3Year 4Year 5Year 6Year 7- 75,000 100,000 125,000 150,000 150,000 150,000

Maintenance costs are expected to be $3,500 per year and increase by 3% in Year 6 and remain at that rate.

Materials in Year 1 are estimated to be $20,000 but remain constant at $15,000 per year for the remaining years.

Labor is estimated to start at $60,000 in Year 1, increasing by 3% each year after.

Revenues are estimated to be:

Year 1Year 2Year 3Year 4Year 5Year 6Year 7- 80,000 95,000 130,000 140,000 150,000 160,000
The company’s required rate of return and cost of capital is 8%.
Management has turned to its finance and accounting department to perform analyses and make a recommendation on which option to choose. They have requested that the four main capital budgeting calculations be done: NPV, IRR, Payback Period, and ARR for each option.
For this assignment, compute all required amounts and explain how the computations were performed. Evaluate the results for each option and explain what the results mean. Based on your analysis, recommend which option the company should pursue.
Superior papers will:

Perform all calculations correctly.

Articulate how the calculations were performed, including from where values used in the calculations were obtained.

Evaluate the results computed and explain the meaning of the results, including why certain measurements are more accurate than others.

Recommend which option to pursue, supported by well-thought-out rationale, and considering any other factors that could impact the recommendation.

Omobola Adesoye-Amoo

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BUS 5110 - AY2020-T4

14 May - 20 May

Written Assignment Unit 6

Written Assignment Unit 6

Submission phase

Workshop timeline with 5 phasesSkip to current tasks

Setup phase

Submission phase

Current phase

Task to doSubmit your work

Task infoOpen for submissions from Thursday, 14 May 2020, 6:05 AM (5 days ago)

Task infoSubmissions deadline: Thursday, 21 May 2020, 5:55 AM (2 days left)

Assessment phase

Task infoOpen for assessment from Thursday, 21 May 2020, 6:05 AM (2 days left)

Task infoAssessment deadline: Thursday, 28 May 2020, 5:55 AM (9 days left)

Grading evaluation phase

Closed

Instructions for submission

Submit a written paper which is 3-4 pages in length (no more than 4-pages), exclusive of the reference page. Your paper should be double spaced in Times New Roman (or its equivalent) font, which is no greater than 12 points in size. The paper should cite at least three sources in APA format. One source can be your textbook.
Please describe the circumstances of the following case study and recommend a course of action. Explain your approach to the problem, perform relevant calculations and analysis, and formulate a recommendation. Ensure your work and recommendation are thoroughly supported.
Case Study:
A manufacturing company is evaluating two options for new equipment to introduce a new product to its suite of goods. The details for each option are provided below:
Option 1

$65,000 for equipment with useful life of 7 years and no salvage value.

Maintenance costs are expected to be $2,700 per year and increase by 3% in Year 6 and remain at that rate.

Materials in Year 1 are estimated to be $15,000 but remain constant at $10,000 per year for the remaining years.

Labor is estimated to start at $70,000 in Year 1, increasing by 3% each year after.

Revenues are estimated to be:
Year 1Year 2Year 3Year 4Year 5Year 6Year 7- 75,000 100,000 125,000 150,000 150,000 150,000

Option 2

$85,000 for equipment with useful life of 7 years and a $13,000 salvage value

Maintenance costs are expected to be $3,500 per year and increase by 3% in Year 6 and remain at that rate.

Materials in Year 1 are estimated to be $20,000 but remain constant at $15,000 per year for the remaining years.

Labor is estimated to start at $60,000 in Year 1, increasing by 3% each year after.

Revenues are estimated to be:

Year 1Year 2Year 3Year 4Year 5Year 6Year 7- 80,000 95,000 130,000 140,000 150,000 160,000
The company’s required rate of return and cost of capital is 8%.
Management has turned to its finance and accounting department to perform analyses and make a recommendation on which option to choose. They have requested that the four main capital budgeting calculations be done: NPV, IRR, Payback Period, and ARR for each option.
For this assignment, compute all required amounts and explain how the computations were performed. Evaluate the results for each option and explain what the results mean. Based on your analysis, recommend which option the company should pursue.
Superior papers will:

Perform all calculations correctly.

Articulate how the calculations were performed, including from where values used in the calculations were obtained.

Evaluate the results computed and explain the meaning of the results, including why certain measurements are more accurate than others.

Recommend which option to pursue, supported by well-thought-out rationale, and considering any other factors that could impact the recommendation.

Megan is considering the purchase of a new car. She wants to buy the new Audi A1, which will cost her R347 500. She will finance 90% of the purchase price at an interest rate of 8% per annum, with monthly payments over three years. Interest is compounded monthly. How much money will she still owe on the loan at the end of one year

Predict the number of new infections of COVID-19 that would occur in the state of New York in 16 days if social distancing had been relaxed on April 17, and we had resumed normal activities.  (The #infected on April 17 = 16,809, generation time = 4 days, and R0= 2.3)

Polycorp Steel Division is considering a proposal to purchase a new machine to produce a new product for a three-year contract. The new machine will cost $1.83 million. The machine has an estimated life of 3 years for accounting and taxation purposes. Installation will cost a further $90,000. The contract will not continue beyond three years and the equipment has an estimated salvage value at the end of three years of $300,000. The tax rate is 29 percent and is payable in the year in which profit is earned. An investment allowance of twenty percent on the outlay plus installation costs is available. The after-tax cost of capital is 14.1%pa. Addition current assets of $85,000 are required immediately for working capital to support the project. Assume that this amount is recovered in full at the end of the life of the project. The new product will be charged $180,000 of allocated head office administration costs each year even though head office will not actually incur any extra costs or cash flows to manage the project. This is in accordance with the firm’s policy of allocating all corporate overhead to divisions. The Division will incur extra marketing and administration cash outflows of $128,000 per year for the project. An amount of $200,000 has been spent on a pilot study and market research for the new product. The projections provided are based on this work. Projected sales in the first year for the new product are 40,000 units at $151 per unit per year. Unit sales are expected to increase by 4%pa for years 2 and 3. Cash operating expenses are estimated to be 75 % of sales (excludes marketing and administration, and head office items). Except for initial outlays, assume cash flows occur at the end of each year (unless otherwise stated). Assume diminishing value depreciation for tax. Required (a) Construct a table showing net cash flow after tax (NCFAT). (b) Calculate the NPV.  

Polycorp Steel Division is considering a proposal to purchase a new machine to produce a new product for a three-year contract. The new machine will cost $1.83 million. The machine has an estimated life of 3 years for accounting and taxation purposes. Installation will cost a further $90,000. The contract will not continue beyond three years and the equipment has an estimated salvage value at the end of three years of $300,000. The tax rate is 29 percent and is payable in the year in which profit is earned. An investment allowance of twenty percent on the outlay plus installation costs is available. The after-tax cost of capital is 14.1%pa. Addition current assets of $85,000 are required immediately for working capital to support the project. Assume that this amount is recovered in full at the end of the life of the project. The new product will be charged $180,000 of allocated head office administration costs each year even though head office will not actually incur any extra costs or cash flows to manage the project. This is in accordance with the firm’s policy of allocating all corporate overhead to divisions. The Division will incur extra marketing and administration cash outflows of $128,000 per year for the project. An amount of $200,000 has been spent on a pilot study and market research for the new product. The projections provided are based on this work. Projected sales in the first year for the new product are 40,000 units at $151 per unit per year. Unit sales are expected to increase by 4%pa for years 2 and 3. Cash operating expenses are estimated to be 75 % of sales (excludes marketing and administration, and head office items). Except for initial outlays, assume cash flows occur at the end of each year (unless otherwise stated). Assume diminishing value depreciation for tax.

Required

1. Construct a table showing net cash flow after tax (NCFAT). Use the method shown in lectures.
2. Calculate the NPV. Is the project acceptable? Why or why not?
3. Conduct a sensitivity analysis showing how sensitive the project is to operating expenses and to the cost of capital. Explain your results.
4. Write a short report explaining your calculation of relevant net cash flows after tax, justifying your selection of cash flows. Be sure to state clearly any assumptions made (implicit and explicit).

Polycorp Steel Division is considering a proposal to purchase a new machine to produce a new product for a three-year contract. The new machine will cost $1.83 million. The machine has an estimated life of 3 years for accounting and taxation purposes. Installation will cost a further $90,000. The contract will not continue beyond three years and the equipment has an estimated salvage value at the end of three years of $300,000. The tax rate is 29 percent and is payable in the year in which profit is earned. An investment allowance of twenty percent on the outlay plus installation costs is available. The after-tax cost of capital is 14.1%pa. Addition current assets of $85,000 are required immediately for working capital to support the project. Assume that this amount is recovered in full at the end of the life of the project. The new product will be charged $180,000 of allocated head office administration costs each year even though head office will not actually incur any extra costs or cash flows to manage the project. This is in accordance with the firm’s policy of allocating all corporate overhead to divisions. The Division will incur extra marketing and administration cash outflows of $128,000 per year for the project. An amount of $200,000 has been spent on a pilot study and market research for the new product. The projections provided are based on this work. Projected sales in the first year for the new product are 40,000 units at $151 per unit per year. Unit sales are expected to increase by 4%pa for years 2 and 3. Cash operating expenses are estimated to be 75 % of sales (excludes marketing and administration, and head office items). Except for initial outlays, assume cash flows occur at the end of each year (unless otherwise stated). Assume diminishing value depreciation for tax.

Required

1. Construct a table showing net cash flow after tax (NCFAT). Use the method shown in lectures.
2. Calculate the NPV. Is the project acceptable? Why or why not?
3. Conduct a sensitivity analysis showing how sensitive the project is to operating expenses and to the cost of capital. Explain your results.
4. Write a short report explaining your calculation of relevant net cash flows after tax, justifying your selection of cash flows. Be sure to state clearly any assumptions made (implicit and explicit).

The Goodsmell perfume company has a new line of perfume and is designing a new bottle for it. Because of the expense of the glass required to make the bottle, the surface area must be less than 150 cm2. The company also wants the bottle to contain at least 100mL of perfume. The design under consideration is in the shape of a cylinder. Determine the maximum volume possible for a cylindrical bottle that has a total surface area of less than 150 cm2. Determine the volume to the nearest 10mL. Report the dimensions of the bottle and the corresponding surface are and volume.

QBO

What steps need to be followed to record a new product and adding a new service?

What is the differences between adding a new product and a sales receipt and a sales invoice?