I only need to find the Cash Flow (Problem A) and the NPV and IRR (Problem F). I
ID: 2707648 • Letter: I
Question
I only need to find the Cash Flow (Problem A) and the NPV and IRR (Problem F). I have all the answers for everything else.
Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $4.3 million in anticipation of using it as a toxic dump site for waste chemicals, but it built a piping system to safely discard the chemicals instead. The land was appraised last week for $5.1 million. In five years, the aftertax value of the land will be $5.5 million, but the company expects to keep the land for a future project. The company wants to build its new manufacturing plant on this land; the plant and equipment will cost $31.84 million to build. The following market data on DEI
Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $4.3 million in anticipation of using it as a toxic dump site for waste chemicals, but it built a piping system to safely discard the chemicals instead. The land was appraised last week for $5.1 million. In five years, the aftertax value of the land will be $5.5 million, but the company expects to keep the land for a future project. The company wants to build its new manufacturing plant on this land; the plant and equipment will cost $31.84 million to build. The following market data on DEI
Explanation / Answer
a. Initial cash outflow=1250000+31.84 million=33090000
F. IRR= (-33090000,5 year,11663000)=22.44%
NPV=-33090000+1163000/(1+0.1218)+1163000/(1+0.1218)^2....1163000/(1+0.1218)^5
=8765703.5113