posted by Charlotte on .
Superior Manufacturing is lauching a new product, that is expected to sell $950,000 of its new product the first year alone, and $1,500,000 each year thereafter. Direct cost labor and materials will be 55% in sales.indirect cost is $80,000 a year, the project requires a new plant with total cost of $1,000,000,which will depreciate in the next five years. A new line will require additional net investment in inventory, and receivable in the amount of $200,000. Assume no need for investment in building and land project. The firm's marginal tax rate is 35%, capital cost is 10%
1. Prepare statement showing the incremental cash flows for project over 8-year period.
2. Calculate payback period (P/B) and the NPV for the project.
3. Your answer for 2, do you think the project should be accepted? Why? Assume superior has a P/B (payback) policy of not accepting projects with life of over three years.
4. If the project required additional investment in land and building, how would this affect your decision?
well,i would be happy to see your work and help you from there.[: