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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Frozen Turkeys Scenario
Cost of Land $ 200,000
Cost of Buildings & Equipment $ 350,000
MACRS Class 20
Life of Project (Years) 5
Terminal Value of Land $ 300,000
Terminal Value of Buildings & Equipment $ 175,000
First year sales (pounds) 250,000
Price per Pound $3.50
Unit Sales Growth Rate 7.0%
Variable Costs as % of Sales 62%
Fixed Costs 75,000
Tax Rate 35%
WACC 10.0%
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1. Prepare a statement of annual cash flows for years 0 through 5. Cash flows in year 0 are your expenses for building and land.
Sales growth is based on the annual growth rate in units.
Assume no changes in fixed or variable costs.
Depreciate the project cost for 5 years, with the cash flow in year 5 to include the terminal cash flow of ending the investment.
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2. Calculate the NPV, profitability index, IRR, MIRR, payback and discounted payback of the cash flows in part 1.
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3. Using scenario manager find best case, worst case, base case of NPV based on sales in pounds, price per pound, and variable cost percent.
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