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Financial Mgt

In: Business and Management

Submitted By jacquieso
Words 435
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Unit 4-Long-Term Financial Management
JO
September 5, 2013
Financial Management/310
American InterContinental University

Abstract
A manufacturing company 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%.

Table of Contents
Introduction………………………………………………………………………………………..4
Incremental Cash Flow……………………………………………………………………………4
Payback Period…………………………………………………………………………………….4
Conclusion………………………………………………………………………………………...5
References…………………………………………………………………………………………6

Introduction An incremental cash flow statement will be prepared for a project over an 8-year period. This paper will also calculate the Payback Period (P/B) and the Net Present Value (NPV) for the project (Brooks, 2012).
Incremental Cash Flow
|Year |0 |1 |
|0 |-$1,200,000 |-$1,200,000 |
|1 |$295,875 |-$904,125 |
|2 |$456,750…...

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