Do you believe that there was sufficient financial information to make a solid decision on what to do?
Course Scenario and Financial Statement Attached.
Powerpoint
- 12 slides with 150-200 speaker notes per slide
- 4 APA references w/in text citations
- Graphics on all slides but Title & Reference.
Assignment Scenario:
Respond to the following scenario with your thoughts, ideas, and comments. Be substantive and clear, and use research to reinforce your ideas.
Apix is considering coffee packaging as an additional diversification to its product line. Here’s information regarding the coffee packaging project:
Initial investment outlay of $40 million, consisting of $35 million for equipment and $5 million for net working capital (NWC) (plastic substrate and ink inventory); NWC recoverable in terminal year
- Project and equipment life: 5 years
- Sales: $27 million per year for five years
- Assume gross margin of 50% (exclusive of depreciation)
- Depreciation: Straight-line for tax purposes
- Selling, general, and administrative expenses: 10% of sales
- Tax rate: 35%
- Assume a WACC of 10%.
Should the coffee packaging project be accepted? Why or why not? Compute the project’s IRR and NPV.
In addition, answer the following questions:
- Do you believe that there was sufficient financial information to make a solid decision on what to do?
- Was there further financial information that you required that was not provided to you?
- What financial figure do you believe was the determinant to your decision and why?
- How would you be able to apply this particular financial information to other situations?
- Discuss risk methodologies used in capital budgeting.
……………………Answer preview…………………..Apix printing Inc. had a total assets value of $ 174,500,000 in 2012 and $157,600,000 in 2013 which indicates a decrease of 9.7%. The company’s retained earnings soared to $26,250,000 in 2013 compared to $6,500,000 in 2012, an increase by about 300%. Cash flow from operating expenses as at 31 December 2013 was $53, 250 while cash flow from financing activities was ($50,050). Much of the inflow from operating activities was due to depreciation of the company’s fixed assets and a decrease in salaries and tax payables contributed to much of the outflow in the same category. The company significant cash outflow in financing activities was caused by the massive financing of the company’s mortgages and also paying dividends to their shareholders during the year. The company also had an outflow effect in its investing activities where they purchased……………….
12 slides
