Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
RWE Enterprises: Expansion Project Analysis RWE Enterprises, Inc. (RWE) is a small manufacturing firm located in the hills just outside of Nashville, TN. The firm is engaged in the manufacture and sale of feed supplements used by cattle raisers. The product has a molasses base but is supplemented with minerals and vitamins that are generally thought to be essential to the health and growth of beef cattle. The final product is put in 125-pound or 200-pound tubs that are then made available for the cattle to lick as desired. The material in the tub becomes very hard, which limits the animals’ consumption. The firm has been running a single production line for the past five years and is considering the addition of a new line. The addition would expand the firm’s capacity by almost 120% since the newer equipment requires a shorter down time between batches. After each production run the boiler used to prepare the molasses for the addition of minerals and vitamins must be heated to 180 degrees Fahrenheit and then must be cooled down before the next batch. The total production run entails about 4 hours and the cool down period is 2 hours (during which time the whole process come to a halt). Using two production lines increases the overall efficiency of the operation since workers from the line that is cooling down can be moved to the other line support the “caning” process involved in filling the feed tubs. The second production line equipment will cost $3 million to purchase and install and will have an estimated life of 10 years at which time it can be sold for an estimated after-tax scrap value of $200,000. Furthermore, at the end of five years the production line will have to be refurbished at an estimated cost of $2 million. RWE’s management estimates that the new production line will add $700,000 per year in after-tax cash flow to the firm such that the full 10-year cash flows for the line are as follows:
Year After-tax Cash Flow
0 $(3,000,000)
1 700,000
2 700,000
3 700,000
4 700,000
5 (1,300,000)
6 700,000
7 700,000
8 700,000
9 700,000
10 900,000
A. If RWE uses a 10% discount rate to evaluate investments of this type, what is the net present value of the project? What does this NPV indicate about the potential value RWE might create by purchasing the new production line?
B. Calculate the internal rate of return and profitability index for the proposed investment. What do these two measures tell you about the project’s viability?
C. Calculate the payback and discounted payback for the proposed investment. Interpret your findings.
bright star dance company will be producing a modern dance show over a three-month period of time in october-december.
Times of changing inventory prices (both inflation and deflation) how can the choice of the inventory costing method impact reported profits?
For a given IOS and MCC, how do financial managers decide which proposed capital budgeting projects to accept, and which to reject?
Microhard has issued a bond with the following characteristics: Calculate the price of this bond if the YTM is 7%
Sarah owns a valuable diamond ring that has been in her family for generations. She is told by an appraiser that the ring has a current make value of $50,000. She feels that the ring is adequately insured because she purchased a Homeowners 3 (special..
You find a bond with 25 years until maturity that has a coupon rate of 10.0 percent and a yield to maturity of 8.5 percent. Suppose the yield to maturity on the bond increases by .25 percent. What is the new price of the bond using duration?
XYZ Company is planning to issue some bonds. The bonds, with a $5,000 par value and the coupon rate of 12% will mature in 10 years. The interest will be paid semi annually. Suppose two years later from the original issuing date, the going rate in the..
Fixed assets are often estimated incorrectly by the percent of sales method because
Fully amortizing, however, negative amortization allowed if payment cap reached. Based on estimated forward rates, the index to which the ARM is tied is focused as follows: Compute the uncapped and capped payments, loan balances, and yield for an ARM..
Fourteen years ago, your parents set aside $37,500 to help fund your college education. Today, that fund is valued at $71,332. What rate of interest is being earned on this account?
What is the value of the bond using both semi-annual and annual discounting
Find the following values for a single cash flow:
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd