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Mr. Gregory White
Mr. Gregory White, Master's Degree
Category: Business and Finance Homework
Satisfied Customers: 5240
Experience:  M.A., M.S. Education / Educational Administration
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A manufacturing company is thinking of launching a new

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A manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 45% of sales. Indirect incremental
costs are estimated at $95,000 a year. The project requires a new plant that will cost a total of $1,500,000, which will be a depreciated straight line over the next 5 years. The new line will also require an additional net investment in inventory and receivables
in the amount of $200,000. Assume there is no need for additional investment in building the land for the project. The firm's marginal tax rate is 35%, and its cost of capital is 10%. To receive full credit on this assignment, please show all work, including
formulae and calculations used to arrive at financial values. Assignment Guidelines Using the information in the assignment description: Prepare a statement showing the incremental cash flows for this project over an 8-year period. Calculate the payback period
(P/B) and the net present value (NPV) for the project. Answer the following questions based on your P/B and NPV calculations: Do you think the project should be accepted? Why? Assume the company has a P/B (payback) policy of not accepting projects with life
of over 3 years. If the project required additional investment in land and building, how would this affect your decision? Explain.
Submitted: 2 years ago.
Category: Business and Finance Homework
Expert:  Mr. Gregory White replied 2 years ago.

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Greg