Articulate how companies make project selection decisions. Determine the implication on earnings and cash flow, and articulate in a memorandum why the MIRR project was chosen over the multitude of options that exists.
Create an Excel spreadsheet for a production plant that the company will lease for 5 years at US$1,500,000 per year; it will cost the firm US$4,000,000 in capital (straight-line depreciation, 5 year life) in year 0; it will cost the firm an additional US$150,000 per year after the new production plant is brought online for other expenses; and it will generate an incremental revenue of US$3,500,000 per year. Use a 40% tax rate, a 10% cost of capital. Assume the company will use cash flow to finance the project.
Discuss how the project would fair under hurdle rate scenarios of 10%, 15%, and 20% (based on MIRR).
Complete the memorandum and spreadsheet.
I have info from post# 151277 already. Feel free to communicate with me.
Dear Student, Enclosed here... View the full answer