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

Assume that payments are made at beginning of each year

What is the future value (FV) of a $1250 annuity payment over 10 years if interest rates are 6 percent (per year)? Assume that the payments are made at the beginning of each y

Expected return on the loan without taking future values

An FI has issued a one-year loan commitment of $2 million for an up-front fee of 25 basis points. The back-end fee on the unused portion of the commitment is 10 basis points. 

Navy in-production aircraft acquisition program

The program manager of a Navy in-production aircraft acquisition program proposes a product improvement program to redesign the ejection seat and aircraft canopy to improve pi

What are the yearly depreciation expenses in this case

An oil company is buying a semi-submersible oil rig for $20 million. Additionally, it will cost $1.5 million to move the oil rig to the oil-field and to prepare it for operati

What is the projected net present value of this project

Antonio's is analyzing a project with an initial cost of $41,000 and cash inflows of $26,000 a year for 2 years. This project is an extension of the firm's current operations

Required an annual rate of return

LLT Company’s stock is currently selling for $105 per share. LLT just paid its annual dividend, so the next one won’t be paid until one year from today. If you required an ann

Opens new product line and requires initial outlay

A company is considering a 5-year project that opens a new product line and requires an initial outlay of $85,000. The assumed selling price is $97 per unit, and the variable

Calculate the overall project eva

NPV and EVA: A project costs $2.5 million up front and will generate cash flows in perpetuity f $220,000. The firm's cost of capital is 7%. Calculate the overall project EVA a

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