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Home Solutions Shrieves Casting Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Sidney Johnson, a recently graduated MBA
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The primary theme of the paper is Shrieves Casting Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Sidney Johnson, a recently graduated MBA in which you are required to emphasize its aspects in detail. The cost of the paper starts from $28 and it has been purchased and rated 4.9 points on the scale of 5 points by the students. To gain deeper insights into the paper and achieve fresh information, kindly contact our support.
Shrieves Casting Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Sidney Johnson, a recently graduated MBA. The production line would be set up in unused space in Shrieves` main plant. The machinery’s invoice price would be approximately $200,000, and it would cost an additional $40,000 to install the equipment. The machinery has an economic life of 4 years, and machine equipment would be depreciated over 4-year using straight line basis depreciation. The machinery is expected to have a salvage value after tax of $25,000 after 4 years of use. The new line would generate incremental sales of 1,250 units per year for 4 years at an incremental cost of $100 per unit. Each unit can be sold for $200. Further, to handle the new line, the firm’s net working capital would have an amount equal to 12% of sales revenues. The firm’s tax rate is 40%, and its overall weighted average cost of capital is 10%. Calculate the net cash flows for each year. Based on these cash flows, what are the project’s NPV, IRR, MIRR, and payback. Calculate the net cash flows for each year. Based on these cash flows, what are the project’s NPV, IRR, and payback? Do these indicators suggest the project should be undertaken?
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