MT 217 can manufacture the new PDA for $200 each in variable costs. Fixed costs
ID: 2671007 • Letter: M
Question
MT 217 can manufacture the new PDA for $200 each in variable
costs. Fixed costs for the operation are estimated to run $4.5 million per year.
The estimated sales volume is 70,000, 80,000, 100,000, 85,000, and 75,000 per
each year for the next five years, respectively. The unit price of the new PDA
will be $340. The necessary equipment can be purchased for $16.5 million and
will be depreciated on a 5 year straight-line schedule.
Net working capital investment for the PDAs will be $6,000,000
this year. Of course NWC will be recovered at the projects end. MT 217 has a 35
percent corporate tax rate.
MT 217 ’s capital structure is 40% debt with an after-tax cost of
8% and 60% equity costing 16%,
Sherry has asked Doug to prepare a report that answers the
following questions:
PLEASE : need the IRR here with detail work how you got it.
and also the rate WACC in the above cell with detail work how you got it.
1) please need the with detail work how 2) please need the wac rate in percentage with detail work how you got it .
Straight Line 5 years Annual
Depreciation $3,300,000 $3,300,000 $3,300,000 $3,300,000 $3,300,000 New
PDA Sales Units 70,000 80,000 100,000 85,000 75,000 Unit
Price $ 340 Unit Sales
of New PDA $23,800,000 Variable
Cost $ 200 $14,000,000 Unit Gross
Marging $9,800,000 Fixed
Cost $4,500,000 Depreciation $3,300,000 EBIT $2,000,000 Taxes 35% Rate $700,000 Net Income $1,300,000 Add
Back Depreciation $3,300,000 Operating
Cash Flow $4,600,000 NWC Cash Flow $ (6,000,000.00) Net Cash Flow ($1,400,000) Total
Project Cash Flows ($16,500,000) ($1,400,000) Internal
Rate of Return IRR #NUM! Net
Present Value Discount
Rate 0.00% ($17,900,000) put the rate, WACC in the above cell
Explanation / Answer
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