Sotzie Toy Company is selling Patton and Eisenhower dolls. Each doll sells for $10. Patton dolls would sell 50,000 and Eisenhower 35,000 the first year. Patton dolls would see an annual increase of 5% with the Eisenhower dolls 7%. The VCR (Variable Cost Rate) for Patton is 50% and Eisenhower 40%. A straight-line method is used in calculating depreciation with money back in 4 years. The WACC is 10% with a 40% tax rate. The equipment cost is $120,000 lasting 10 years then selling as scrap for $20,000.
1. What is the sales/expense projection?
2. What is the capital budgeting?
3. How to calculate the cash flow for 10 years.
4. Explain the following:
a) the independent and mutually exclusive projects?
b) the payback period?
c) the NPV for each?
d) the IRR for each?
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