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Shawn P Adamo, CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.

Category: Finance

Satisfied Customers: 2884

Experience: CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.

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I need only to answer the following two questions on the below

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I need only to answer the following two questions on the below data:

• #3 question - What is the project’s initial outlay? • #4 question - Sketch out a cash flow diagram for this project.

Given your lack of tenure at Caledonia, you have been asked not only to provide a recommendation, but also to respond to a number of questions aimed at judging your understanding of the capital-budgeting process. The memorandum you received outlining your assignment follows: To: XXXXX XXXXX Financial Analyst From: Mr. V. Morrison, CEO, Caledonia Products Re: Cash Flow Analysis and Capital Rationing We are considering the introduction of a new product. Currently we are in the 34% tax bracket with a 15% discount rate. This project is expected to last five years and then, because this is somewhat of a fad project, it will be terminated. The following information describes the new project: Cost of new plant and equipment: $ 7,900,000 Shipping and installation costs: $ 100,000 Unit sales: Sales price per unit: $300/unit in years 1–4 and $260/unit in year 5. Variable cost per unit: $180/unit Annual fixed costs: $200,000 per year Working capital requirements: There will be an initial working capital requirement of $100,000 just to get production started. For each year, the total investment in net working capital will be equal to 10% of the dollar value of sales for that year. Thus, the investment in working capital will increase during years 1 through 3, then decrease in year 4. Finally, all working capital is liquidated at the termination of the project at the end of year 5. Depreciation method: Straight-line over 5 years assuming the plant and equipment have no salvage value after 5 years.

Click on the blue word "answer" I have answered this question previously. please let me know if this answers the question.

Shawn P Adamo :

• a. Should Caledonia focus on cash flows or accounting profits in making its capital-budgeting decisions? Should the company be interested in incremental cash flows, incremental profits, total free cash flows, or total profits? • b. How does depreciation affect free cash flows? • c. How do sunk costs affect the determination of cash flows? • d. What is the project’s initial outlay? • e. What are the differential cash flows over the project’s life? • f. What is the terminal cash flow? • g. Draw a cash flow diagram for this project. • h. What is its net present value? • i. What is its internal rate of return? • j. Should the project be accepted? Why or why not? • k. In capital budgeting, risk can be measured from three perspectives. What are those three measures of a project’s risk? • l. According to the CAPM, which measurement of a project’s risk is relevant? What complications does reality introduce into the CAPM view of risk, and what does that mean for our view of the relevant measure of a project’s risk? • m. Explain how simulation works. What is the value in using a simulation approach? • n. What is sensitivity analysis and what is its purpose?

Customer:

I had offered $30.00 for two (2) answers, I cannot afford $59.00 is $30.00 acceptable?