Discuss other factors that need to be considered in decision

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Reference no: EM133926363

Problem

As a scholar, practitioner, and leader in corporate finance, you may find yourself conducting financial analyses for various capital expenditure decisions. Complete a financial analysis for the following business case.

Custom Molds & Casting Company makes custom molds and fabricated parts for its customers. These molds are made to order and are used to make various products. Custom Molds & Casting also makes parts based on customer satisfaction. Custom Molds & Casting casts, fabricates, and machines these parts to customers' specifications. The company has experienced increased business, leading to its decision to purchase new equipment, involving capital expenditure.

The equipment would cost $300,000, plus a shipping cost of $20,000 and $22,000 in installation fees. This equipment has an economic life of 4 years, and the company's accounting department has noted that this equipment is classified as a MACRS 3-year class. The machinery is expected to have a salvage value of $15,000 after 4 years.

Review the Financial Analysis document.

Discuss 525 to 700 words analysis addressing each of the items below:

1. Construct annual incremental operating cash flow statements for the next 4 years.

2. Calculate the net present value (NPV) based on the projected cash flows. Get the instant assignment help.

3. Conduct a sensitivity analysis. Assume that the new product line is expected to decrease sales of the firm's other lines by $50,000 annually. Should this be considered in the analysis? Why or why not? If so, how?

4. Discuss other factors that need to be considered in this decision.

5. Explain why Custom Molds & Casting Company should or should not purchase this equipment.

Reference no: EM133926363

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