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Unformatted text preview: Mason Products – The Sequel It's been two months since you took a position as an assistant financial analyst at Mason Products. Your next assignment involves both the calculation of cash flows associated with a new investment under consideration and the evaluation of several mutually exclusive projects. Currently, Mason is in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital. This project is expected to last five years and then, because this is somewhat of a fad project, to be terminated. The following information describes the new project: __________________________________________________________________________ Cost of new plant and equipment : $7,900,000 Shipping and installation costs : $ 100,000 Unit sales : Year Units Sold 1 70,000 2 120,000 3 140,000 4 80,000 5 60,000 Sales price per unit : $300/unit in years 1-4, $260/unit in year 5 Variable cost per unit : $180/unit Annual fixed costs : $200,000 Working-capital requirements : There will be an initial working-capital requirement of $100,000 just to get production started. For each year, the total investment in net working capital will be equal to 10 percent of production started....
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- Fall '11
- Valuation, mutually exclusive projects.