Cash flow

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Respond to Parts A to N at the end of the case as a concise management statement. Round any dollar amounts to the nearest dollar ($1,500,074) and any percentages to two decimals (9.56%). Answer all of the questions Do not simply list the questions and answers. Explain the reasoning behind your answers and support your answers with examples from the text and other research.Include both a Word document for your written answers and an Excel document for your calculated solutions.For questions requiring calculations, use formulas in Excel to calculate your solution. Document Preview: Respond to Parts A to N at the end of the case as a concise management statement. Round any dollar amounts to the nearest dollar ($1,500,074) and any percentages to two decimals (9.56%). Answer all of the questions Do not simply list the questions and answers. Explain the reasoning behind your answers and support your answers with examples from the text and other research.Include both a Word document for your written answers and an Excel document for your calculated solutions.For questions requiring calculations, use formulas in Excel to calculate your solution. EXERCISE 1 It’s been 2 months since you took a position as an assistant financial analyst at Caledonia Products. Although your boss has been pleased with your work, he is still a bit hesitant about unleashing you without supervision. Your next assignment involves both the calculation of the cash flows associated with a new investment under consideration and the evaluation of several mutually exclusive projects. Given your lack of tenure at Caledonia, you have been asked not only to provide a recommendation but also to respond to a number of questions aimed at judging your understanding of the capital-budgeting process. The memorandum you received outlining your assignment follows: To: The Assistant Financial Analyst From: Mr. V. Morrison, CEO, Caledonia Products Re: Cash Flow Analysis and Capital Rationing We are considering the introduction of a new product. Currently we are in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital. This project is expected to last 5 years and then, because this is somewhat of a fad product, be terminated. The following information describes the new project: Cost of new plant and equipment$ 7,900,000 Shipping and installation costs$ 100,000 Unit sales YEAR UNITS SOLD 70,000 120,000 140,0004 80,000 60,000 Sales price per unit $300/unit in years 1 through 4, $260/unit in year 5 Variable cost per unit... Attachments: 5-Caledonia-d....docx Feb 20 2013 04:49 AM

 

Solution ID:608955 | This paper was updated on 26-Nov-2015

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