Describe Investment Valuation and Decision Making

Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time.Respond to the following scenario with your thoughts, ideas, and comments. Be substantive and clear, and use research to reinforce your ideas.Over lunch, you and Mary meet to discuss next steps with the expansion project.The information you hand to Mary shows the following:You continue your conversation.Complete the above worksheet for this assignment. U4IPPoints Possible 100 Download the Excel Spreadsheet from the Assignment List. Fill in the Cash flow for each year. With the following information: Initial investment outlay of $30 million, consisting of $25 million for equipment and $5 million for net working capital (NWC) (plastic substrate and ink inventory); NWC recoverable in terminal yearProject and equipment life: 5 yearsSales: $25 million per year for five yearsAssume gross margin of 60% (exclusive of depreciation)Depreciation: Straight-line for tax purposesSelling, general, and administrative expenses: 10% of salesTax rate: 35% Use a WACC of 10%. Compute, cash flows. The NPV and IRR of the project will be automatically calculated. If it does not you have made a mistake. Submit the Excel Spreadsheet.  U4I: INTELLIPATHComplete your Intellipath by SundayIntellipath Unit: Investment Valuation and Decision MakingPoints Possible: 125 Try to complete your Determine Knowledge by Wednesday.If you have problems, flag the question in Intellipath.If you have questions, DO NOT use the Intellipath message system. Email me. Try to include a screen shot of the question.Your path will only consist of learning nodes that you need to work on and is individualized for you, so if you have difficulty with a question you must flag the question in Intellipath.    U4IP HintsNWC Recapture is in the fifth year. NWC is given in task list. The discount rate (Cost of Capital) is given. A hint: the numbers will look the same for the first 4 years,. In Year 5 it will be different due to NWC recovery. Initial cash flow for year 0 is given. You must put a cash flow for year 0 into your spreadsheet. It is given as initial outlay. It should be inputed as a negative quantity. Sales are given (This is also called Revenue) Gross margin is given. Calculate: COGS (You must find the equation that gives you COGS from gross margin and sales (revenue)). Do a search on \”COGS, Margin, Sales\”. You must determine what is COGS. Calculate SGA expense. Calculate yearly depreciation, straight line for tax purposes, look this up. There is no salvage value. Subtract COGS, SGA and depreciation from Sales (Revenue). This gives EBT, Earnings Before Taxes, also called Operating Income. Calculate Taxes on basis of EBT, tax rate is given. Subtract this from EBT (Operating Income). This gives Net Income. Add Depreciation back in to Net Income. This gives cashflow. Add NWC recovery to Net Income in the 5 year. This gives a Cashflow for each year. You should enter a cashflow for each year into your spreadsheet.Enter year 0 cash flow with a negative number: Cell B9Enter year 1-4 (these should be the same): C9 –F9.Enter year 5 cash flow after you have added back NWC: G9. The NPV and IRR should calculate automatically. If it does not you have made a mistake. To calculate depreciation:  By “straight-line,” we mean that the depreciation deduction is the same every year. By “written down to zero,” we mean that the asset is assumed to have no value at the end of five years, that is no salvage value. Here is an online tutorial that may be of help for NWC: Here is another:

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