Don't know exactly how to work here. Please help

 

Need an analysis for new manufacturing firm, and need a 5-year financial projection, and compute the Net Present Value and IRR for the project.

 

CAPITAL INVESTMENT

The capital investment (Year 0) for the new factory will consist of:

·        $15,000,000 for construction of the factory itself, with a depreciable life of 39 years.

·        $9,00,000 for equipment installed in the factory, with a depreciable life of 15 years.

·        $5,000,000 for furniture and fixtures in the factory, with a depreciable life of 7 years.

Your company's method of depreciation is straight line.

REVENUES

In Year 1 of production, estimate how much to produce and sell ________________ units.

Year 2 production will be 5% greater than Year 1

Year 3 production will be 5% greater than Year 2

Year 4 production will be 2% greater than Year 3

Year 5 production will be 2% greater than Year 4

 

In Year 1 of production, estimate sales price will be ______________ per unit.

The sales price in Years 2 and 3 will be the same as Year 1.

The sales price in Year 4 will be 2% higher than Year 3.

The sales price in Year 5 will be 2% higher than Year 4.

 

COST OF GOOD SOLD

Cost of Goods Sold will be __________________ per unit in Year 1.

Years 2 and 3 will be the same as Year 1.

Year 4 will be 2% greater than Year 3.

Year 5 will be 2% greater than Year 4.

 

EXPENSES

Payroll - Management: Management payroll will consist of 40 employees. Management payroll for Year 1 is $75,000 per Management employee. Management payroll per employee will increase 3% each year.

 

Payroll - Manufacturing: Manufacturing payroll will consist of 1 employee for each 1,000 units produced and sold in a year. Manufacturing payroll for Year 1 is $55,000 per Manufacturing employee. Manufacturing payroll per employee will increase 3% each year.

 

Bank Charges Expenses will be equal to ½ of 1% (.0005) of Total Revenues each year.

 

Employee Training Expense will be equal to $2,500 per employee. The cost per employee will increase each year by an estimated inflation amount equal to 3%.

 

The following expenses are a fixed estimate grown each year by the inflation estimate

 

 

EXPENSE NAME YEAR 1 EXPENSE ANNUAL GROWTH RATE

Insurance $100,000 3%

 

Maintenance $500,000 3%

 

Office Equipment $250,000 3%

and Supplies

 

Professional Fees $3,000,000 3%

(Legal / Accounting)

 

Real Estate Taxes $1,200,000 3%

 

Telephone and $450,000 3%

Communications

 

Utilities $1,000,000 3%

 

 

 

Miscellaneous Expense will be equal to 2% of Total Revenues each year.

 

INCOME TAXES

company income tax rate is 34%

 

RESIDUAL VALUE / HORIZON VALUE / TERMINAL VALUE

Assumption for Operating Cash Flows for Year 6+ are that the Cash Flow from Year 5 will continue at a constant value into the future

 

WEIGHTED AVERAGE COST OF CAPITAL

It is assumed that the project will be capitalized with ______% long term debt at a gross rate of 9.00%. The balance of the capital will be common stock, with a projected cost of 20%.