Analysis of the investment

Assignment Help Financial Management
Reference no: EM13875029 , Length: word count:1000

Assignment: Analysis of the Investment

You analysed projected financial data and assessed its value to making a physical expansion decision. As you have heard in the media presentation from CFO Mary Scott, Anthony's Orchard is faced with another type of expansion decision. CEO Bob Frost is eager to expand the product line to include apple juice.

Of course, a decision to expand a product line has very many variables. In this assignment, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice). You also will investigate the value of a number of financial measurements. Ultimately, you will develop a recommendation for the company, and this analysis will help you to support that recommendation.

To prepare for this Individual Assignment:

Review the Anthony's Orchard case study in the unit resources.

Consider the following:

- The company, according to Anthony's Orchard Strategic Plan, is hoping to purchase an apple press in order to start a new line of prepared apple products-apple juice.

- The company estimates this new product offering will generate an additional $95,000 net income per year and estimated cash flows of $90,000 per year. The cost of the apple press will be $950,000 and this expenditure, as shown in the budgeted cash flow statement, is expected to take place in the fourth quarter of 2012.

- The apple press is expected to have a seven-year life and no salvage value.

- The company requires a 10% return on investment for new capital investments and the company uses a cost of capital of 8%.

- The company's revenue goal for 2015 is $25 million.

- Assume a minimum 12% gross margin on revenue.

To complete this Individual Assignment, answer the following:

- Do you think the company's revenue goal of $25 million by 2015 is realistic?

- Explain how purchase of the apple press might affect the company's revenue goals. Based on this information, explain whether Anthony's Orchard should invest in the apple press. Support your response with relevant information provided in the case study, the previous year's financials for 2010, the current year's financials for 2011 and the budgeted year's financials for 2012.

- Draft budgeted financial statements from 2012 to 2015 under both options that provide a realistic assessment of expected revenues and costs, and explain how you have arrived at these budgeted figures.
Notes:

You should fully state and justify any assumptions that you make in relation to the financial data you use. Be sure to include all references as well.

This Individual Assignment forms the basis of Section 2 of your Final Project. You will receive feedback on this work from your Faculty Member, and will be expected to incorporate any suggestions into the Final Project.

Your submission (excluding appendices) should be 1,000 words (+/- 10%) in length.

Verified Expert

Reference no: EM13875029

What per visit price must be set for service to breakeven

Assume that managers of HBO Hospital are setting the price on a new outpatient service. Here are relevant data estimates: What per visit price must be set for the service to b

Annuity with equal annual payments beginning immediately

Jessie won big in a recent raffle. Her prize entitles her to a 20-year annuity with equal annual payments beginning immediately and totaling $10,000,000. Jessie has agreed to

What is the required rate of return on MNC stock

MNC Corporation has a beta of 1.86. The risk-free rate of interest is 3%, and the return on the stock market overall is expected to be 11%. What is the required rate of return

With the growth rate falling off to constant

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 26 percent for the next three years, with the growth rate falling off to a constant 6 percent there

Treasury note pays interest

A 6% coupon U.S. Treasury note pays interest on May 31 and November 30 and is traded for settlement on August 10. What is the accrued interest on the $100,000 face amount of t

What is the balance at the end of year

How much interest will you pay during the 14th year of a $350,000 house price, 30 year, 6.5% monthly compounded, 80 LTV loan? How much principal will you pay with the 76th pay

Current appraised value is equivalent to the present value

Carrie Fisher is currently leasing the space of her walk-in Botox clinic, Age Wars, at $2500 per month. You find out that Carrie estimated the salvage value by assuming 8% per

Consider another uneven cash flow stream

Consider another uneven cash flow stream: What is the present ( year 0) value of the cash flow stream if the opportunity cost rate is 10 percent? What is the future (year 5) v

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd