Business Finance Homework Help

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.

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.

If you need a sample I can give.