Financial inforamtion
Financial inforamtion
Apix is considering coffee packaging as an additional diversification to its product line. Hereâs information regarding the coffee packaging project:
â¢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
â¢Project and equipment life: 5 years
â¢Sales: $27 million per year for five years
â¢Assume gross margin of 50% (exclusive of depreciation)
â¢Depreciation: Straight-line for tax purposes
â¢Selling, general, and administrative expenses: 10% of sales
â¢Tax rate: 35%
Assume a WACC of 10%.
Should the coffee packaging project be accepted? Why or why not? Compute the projectâs IRR and NPV.
In addition, answer the following questions:
â¢Do you believe that there was sufficient financial information to make a solid decision on what to do?
â¢Was there further financial information that you required that was not provided to you?
â¢What financial figure do you believe was the determinant to your decision and why?
â¢How would you be able to apply this particular financial information to other situations?
â¢Discuss risk methodologies used in capital budgeting.
Note: this presentation should include 200words for each slide