Purchase Solution

Managerial Finance for Superior Manufacturing

Not what you're looking for?

Ask Custom Question

Superior Manufacturing is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project requires a new plant that will cost a total of $1,000,000, which will be depreciated straight line over the next five years. The new line will also require an additional net investment in inventory and receivables in the amount of $200,000. Assume there is no need for additional investment in building and land for the project. The firm's marginal tax rate is 35%, and its cost of capital is 10%. Based on this information you are to complete the following tasks.

Prepare a statement showing the incremental cash flows for this project over an 8-year period.

Calculate the Payback Period (P/B) and the NPV for the project.

Based on your answer for question 2, do you think the project should be accepted? Why? Assume Superior has a P/B (payback) policy of not accepting projects with life of over three years.

If the project required additional investment in land and building, how would this affect your decision? Explain.

Purchase this Solution

Solution Summary

This solution assists with managerial finance questions for Superior Manufacturing.

Purchase this Solution

Free BrainMass Quizzes
Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce


This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Learning Lean

This quiz will help you understand the basic concepts of Lean.