Financial Manager - PIQUI This almost al financial analysis project r.docx - Financial Manager PIQUI This almost al financial analysis project requires

Financial Manager - PIQUI This almost al financial analysis project r.docx

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Financial Manager - PIQUI This almost al financial analysis project requires all knowled ad in this course. It also teaches us how to use Excel to perform financial anal a professional way. Project - Capital Budgeting, Breakeren Analysis, and Seenario Analysis Annie De CFO of Dummont Inc. opened the company confidential e contains a draft of a competitive bid for a contract to supply duffel canvasnih Canadian Air Forces. The cover memo from Dummont's CEO asked Mrs. Du review the bid before it was submitted contains a draft of a The hide and its documents had been prepared by Dummont's sales sall alla Dummont to supply 1000 yards of duffel canvas per year for years. The proposed selling price was fixed at S30 per yard. The variable costs were estimated to be sure vand and the fixed costs (excluding depreciation) to be $300,000 in the first Moreover, both variable costs and fixed costs are expected to increase at the inflation rate of 1% per year after the first year), but the yards sold and the price per yard would be fixed by contract. 110,372 Mrs. Duncan was not usually involved in sales, but this bid was unusual in at least two aspects. First, if accepted by the client, it would commit Dummont to a fixed price, long- term contract. Second, producing the duffel canvas would require an investment of million to purchase machinery and to refurbish Dummont's plant in Halifax, Nova Scotia right now at the beginning of the first year. Mrs. Duncan started working on the proposal and after a week she had collected the following information about the project: The plant in Halifax was old since it had been built in the 1920s. It is
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currently idle and fully depreciated on Dummont's books, except for the purchase cost of the land of $10,000. So, for the base case analysis, Dummont can just ignore the current market value of the land. . Now the land is a valuable shorefront property, and Mrs. Duncan estimates it can be sold for $600,000 at the end of year 5. Refurbishing the plant would cost $500,000. This investment would be depreciated in an asset class that has a CCA rate of 5% The new machinery would cost $900,000. This investment could be depreciated in an asset class that has a CCA rate of 30% The refurbished plant and new machinery would last for many years. However, the remaining market for duffel canvas was small and it was not clear that additional orders could be obtained once the Forces contract was finished. The machinery was custom built and could be used only for duffel canvas. Its second-hand value at the end of five years was probably zero Sales her - Sundvar: CA Finally, Mrs. Duncan estimated that the investment in working capital would average Tons of sales. The working
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  • Spring '17
  • DEBORAHGOLDSMITH

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