90.2K

Verified Solution

Link Copied!

Packaging is considering expanding its production capacity by purchasing a new machine, the XC 750The cost of the XC-750 $2.66 millionUnfortunately this machine will take several months and will partially disrupt productionThe firm has just completed a 45,000 feasibility study to analyze the decision to buy the XC resulting in the following estimates MarketingOnce the xc - 750 in operational next year , the extra capacity is expected to generate \$10.20 million per year in additional sales, which will continue for the 10 of the machine OperationsThe disruption caused by the installation will decrease sales by $4 93 million this yearwith Billingham's existing productsthe cost of goods for the produ produced by the xG - 750 is expected to be 71% of their sale price. The increased production will also require increased inventory on hand of 1.09 million during the life of the project, including year 0 Human ResourcesThe expansion will require additional sales and administrative personnel at a cost of 2.04 million per year AccountingThe XC-750 will be depreciated via the straight-line method over the 10-year life of the machine. The firm expects receivables from the new sales to be 16\% revenues and payables to be 10% of the cost of goods soldBillingham's marginal corporate tax rate 21 % a. Determine the incremental earnings from the purchase of the XC750 bDetermine the free cash flow from the purchase of the XC750 the appropriate cost of capital for the expansion is % comoute the NPV of the purchase

Balingham Packaging b considering expanding its production capscaly by purchasing a new machine, the XC-750. The cost of the XC-750 ks57.66mili on. Unfortunately, installin this machine will take several months and will partiaby distupt producson. The firm has just completed a 545,000 feasibility study to analyze the decision to buy the XC.750, resciliting in the following estinates' - Marketing. Once the XC-750 is operational nex year, the extra capacily is expected to gonerate 51020 million per year in additional sales. which will continue for the 10 -year fit of the machine - Operatons. The denuption caused by the installation will decrease sales by $493 million this year. As with Baitigharits existing products, the cost of goods for the products produced to the XC750 is mpected to be 71y of their tale pice. The inceased production will abo reguite increased inventory on hand of $1.09 million during the life of the projoct including year 0 - Human Resources. The expansion will require additional tales and administrative personnel at a cost of 52.04 milition per year. - Accounting The XC.750 will be depreclated via the teraight-fine method over the 10 -yeat life of the machine. The firm expects receivables from the new sales to be 16% of tevenues and payables to be 10% of the cost of goodo sold. Bilingham's marginal corporate tax rate is 21%. A. Detersine the incremental earnings from the purchase of the XC.750 b. Determine the froe cath flow from the paichase of the XCC750. c. If the aborociate cost of cacital for the exbanslon is 9.5%. consoute the NPV of the eurchased a. Deterruine the viciemental eamings from the purchase of the XC-750 Culculate the incrnmontat eamings from the purchase of the XC. 750 below (with vh. without XC?150) (Round to the nearest datlar) Incremental Fffects iwith vs. without C.750) Billingham Packaging is considering expanding its production capacity by purchasing a new machine, this machine will take several months and will partially disrupt production. The firm has just completed resulting in the following estimates: - Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $10 of the machine. - Operations: The disruption caused by the installation will decrease sales by $4.93 million this year. A produced by the XC-750 is expected to be 71% of their sale price. The increased production will also require increased inventory on hand of $1.09 million during the life of the - Human Resources: The expansion will require additional sales and administrative personnel at a cos - Accounting: The XC-750 will be depreciated via the straight-line method over the 10 -year life of the n revenues and payables to be 10% of the cost of goods sold. Billingham's marginal corporate tax rate is a. Determine the incremental earnings from the purchase of the XC-750. b. Determine the free cash flow from the purchase of the XC-750. c. If the a abrobriate cost of capital for the exbansion is 9.5%. combute the NPV of the purchase. Balingham Packaging b considering expanding its production capscaly by purchasing a new machine, the XC-750. The cost of the XC-750 ks57.66mili on. Unfortunately, installin this machine will take several months and will partiaby distupt producson. The firm has just completed a 545,000 feasibility study to analyze the decision to buy the XC.750, resciliting in the following estinates' - Marketing. Once the XC-750 is operational nex year, the extra capacily is expected to gonerate 51020 million per year in additional sales. which will continue for the 10 -year fit of the machine - Operatons. The denuption caused by the installation will decrease sales by $493 million this year. As with Baitigharits existing products, the cost of goods for the products produced to the XC750 is mpected to be 71y of their tale pice. The inceased production will abo reguite increased inventory on hand of $1.09 million during the life of the projoct including year 0 - Human Resources. The expansion will require additional tales and administrative personnel at a cost of 52.04 milition per year. - Accounting The XC.750 will be depreclated via the teraight-fine method over the 10 -yeat life of the machine. The firm expects receivables from the new sales to be 16% of tevenues and payables to be 10% of the cost of goodo sold. Bilingham's marginal corporate tax rate is 21%. A. Detersine the incremental earnings from the purchase of the XC.750 b. Determine the froe cath flow from the paichase of the XCC750. c. If the aborociate cost of cacital for the exbanslon is 9.5%. consoute the NPV of the eurchased a. Deterruine the viciemental eamings from the purchase of the XC-750 Culculate the incrnmontat eamings from the purchase of the XC. 750 below (with vh. without XC?150) (Round to the nearest datlar) Incremental Fffects iwith vs. without C.750) Billingham Packaging is considering expanding its production capacity by purchasing a new machine, this machine will take several months and will partially disrupt production. The firm has just completed resulting in the following estimates: - Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $10 of the machine. - Operations: The disruption caused by the installation will decrease sales by $4.93 million this year. A produced by the XC-750 is expected to be 71% of their sale price. The increased production will also require increased inventory on hand of $1.09 million during the life of the - Human Resources: The expansion will require additional sales and administrative personnel at a cos - Accounting: The XC-750 will be depreciated via the straight-line method over the 10 -year life of the n revenues and payables to be 10% of the cost of goods sold. Billingham's marginal corporate tax rate is a. Determine the incremental earnings from the purchase of the XC-750. b. Determine the free cash flow from the purchase of the XC-750. c. If the a abrobriate cost of capital for the exbansion is 9.5%. combute the NPV of the purchase

Answer & Explanation Solved by verified expert

See Answer