Financial Management

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 45% of sales. Indirect incremental costs are estimated at $95,000 a year. The project requires a new plant that will cost a total of $1,500,000, which will be a depreciated straight line over the next 5 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 the land for the project. The firm’s marginal tax rate is 35%, and its cost of capital is 10%. 

To receive full credit on this assignment, please show all work, including formulae and calculations used to arrive at financial values.

Assignment Guidelines:

• Using the information in the assignment description:

Prepare a statement showing the incremental cash flows for this project over an 8-year period.Calculate the payback period (P/B) and the net present value (NPV) for the project.Answer the following questions based on your P/B and NPV calculations:Do you think the project should be accepted? Why?Assume the company has a P/B (payback) policy of not accepting projects with life of over 3 years.If the project required additional investment in land and building, how would this affect your decision? Explain.

Your submitted assignment (125 points) must include the following:

• A double-spaced Word document of 2–3 pages that contains your calculation values, your complete calculations, any formulae that you used, and your answers to the two questions listed in the assignment guidelines.

You must include your explanation of how you used Microsoft Excel for your calculations if applicable.

k periods, net present value, and cash flows.

  

1

Undergraduate Program Rubric—BACHELOR OF BUSINESS ADMINISTRATION and ASSOCIATE OF ARTS IN BUSINESS ADMINISTRATION
Expectations: Student work at the undergraduate level is expected to focus on a broad overview of the academic discipline, along with—where appropriate—basic theoretical
frameworks of professional practices and familiarity with discipline-specific tools and their application.

Criteria Exemplary (A)) Accomplished (B) Proficient (C) Partially Proficient (D) Unacceptable (F)

Functional areas include, where
applicable:

BUSINESS PROGRAM CONTENT

Leadership, management,
innovation, and teambuilding

Operations and Marketing
Finance
Economics
Qualitative and quantitative

tools
Technology and Internet
Ethical and legal issues
International issues

Demonstrates
outstanding or
exemplary mastery of
content, appropriate to
the assignment and the
relevant terminal course
objectives and program
learning outcomes.

All requirements of the
assignment are included
in the response.

Demonstrates sound
or accomplished
mastery of content,
appropriate to the
assignment and the
relevant terminal
course objectives and
program learning
outcomes.

Most requirements of
the assignment are
included in the
response.

Demonstrates adequate
or proficient mastery of
content, appropriate to
the assignment and the
relevant terminal
course objectives and
program learning
outcomes.

Many requirements of
the assignment are
included in the
response.

Demonstrates
inadequate or partially
proficient mastery of
content, appropriate
to the assignment and
the relevant terminal
course objectives and
program learning
outcomes.

Some requirements of
the assignment are
included in the
response.

Demonstrates
unacceptable mastery
of content,
appropriate to the
assignment and the
relevant terminal
course objectives and
program learning
outcomes.

Few or no
requirements of the
assignment are
included in the
response.

Approach and Purpose,
Organization, Style, Grammar,
Mechanics, Format,
Presentation and Delivery
(where applicable)

EFFECTIVE COMMUNICATION

Demonstrates outstanding
or exemplary application
of written, visual, or oral
skills.

Demonstrates outstanding
expression of topic, main
idea, and purpose.

Audience is addressed
appropriately.

Language clearly and
effectively communicates
ideas and content relevant
to the assignment.

Errors in grammar,
spelling, and sentence
structure are minimal.

Organization is clear.

Format is consistently
appropriate to assignment.

Demonstrates sound or
accomplished
application of written,
visual, or oral skills.

Demonstrates sound or
accomplished expression
of topic, main idea, and
purpose.

Audience is usually
addressed appropriately.

Language does not
interfere with the
communication of ideas
and content relevant to
the assignment.

Errors in grammar,
spelling, and sentence
structure are present,
but do not distract.

Organization is apparent

Demonstrates adequate
or proficient application
of written, visual, or oral
skills.

Demonstrates adequate
expression of topic, main
idea, and purpose.

Audience is generally
addressed appropriately.

Language is adequate,
generally communicating
ideas and content
relevant to the
assignment.

Errors in grammar,
spelling, and sentence
structure are present and
sometimes distract from
meaning or presentation.

Organization is adequate,

Demonstrates
inadequate or partially
proficient application of
written, visual, or oral
skills.

Demonstrates
inadequate or partial
expression of topic,
main idea, and purpose.

Audience is often not
addressed appropriately.

Language often impedes
the communication of
ideas and content
relevant to the
assignment.

Errors in grammar,
spelling, and sentence
structure are frequent
and often distract from

Demonstrates
unacceptable application
of written, visual, or oral
skills.

Demonstrates
unacceptable, unclear
expression of topic, main
idea, and purpose.

Audience is not
addressed appropriately.

Language does not
clearly and effectively
communicate ideas and
content relevant to the
assignment.

Errors in grammar,
spelling, and sentence
structure are pervasive
and consistently
distracting.

2

Criteria Exemplary (A)) Accomplished (B) Proficient (C) Partially Proficient (D) Unacceptable (F)
Presentation and delivery
are confident and
persuasive (where
applicable).

and mostly clear.

Format is appropriate to
assignment, but not
entirely consistent.

Presentation and
delivery are mostly
confident and
persuasive (where
applicable).

though confusing or
unclear at times.

Format is adequate, but
inconsistent.

Presentation and delivery
are adequate, with
evident lack of
confidence and
persuasive power (where
applicable).

meaning or
presentation.

Organization is
inadequate, confusing,
and distracting.

Format is inadequate
and obscures meaning.

Presentation and
delivery are inadequate,
lacking confidence and
persuasive power
(where applicable).

Format is absent or
consistently appropriate
to assignment.

Organization is not
apparent and completely
inadequate.

Presentation and
delivery are
unacceptable, with little
or no confidence and
persuasive power
(where applicable).

CRITICAL AND CREATIVE
THINKING, PROBLEM-SOLVING

PRACTICAL REASONING

Demonstrates outstanding
or exemplary ability to
analyze assumptions and
evaluate evidence,
complexities of issues, and
alternatives. Where
required, demonstrates
outstanding or exemplary
ability to use creativity and
originality in problem-
solving.

Demonstrates sound or
accomplished ability to
analyze assumptions and
evaluate evidence,
complexities of issues,
and alternatives. Where
required, demonstrates
sound or accomplished
ability to use creativity
and originality in
problem-solving.

Demonstrates adequate
or proficient ability to
analyze assumptions and
evaluate evidence,
complexities of issues,
and alternatives. Where
required, demonstrates
adequate or proficient
ability to use creativity
and originality in
problem-solving.

Demonstrates
inadequate or partially
proficient ability to
analyze assumptions and
evaluate evidence,
complexities of issues,
and alternatives. Where
required, demonstrates
inadequate or partially
proficient ability to use
creativity and originality
in problem-solving.

Demonstrates
unacceptable ability to
analyze assumptions and
evaluate evidence,
complexities of issues,
and alternatives. Where
required, demonstrates
unacceptable ability to
use creativity and
originality in problem-
solving.

INFORMATION LITERACY AND
RESEARCH

PRACTICAL REASONING

Demonstrates
outstanding selection
and use of high quality,
credible, and relevant
sources to develop ideas
that are appropriate to
the assignment.

Sources are consistently
cited according to
required documentation
(e.g., APA), with almost
no errors.

Demonstrates sound
selection and use of
credible, relevant
sources to support
ideas that are
appropriate to the
assignment.

Sources are generally
cited according to
required
documentation (e.g.,
APA), with few errors.

Demonstrates adequate
selection and use of
credible and/or
relevant sources to
support ideas that are
appropriate to the
assignment.

Sources are cited
according to required
documentation (e.g.,
APA), with some errors.

Demonstrates
inadequate selection
and use of sources to
support ideas in the
writing.

Sources are
inconsistently cited
according to required
documentation (e.g.,
APA), with frequent
errors.

Demonstrates
unacceptable selection
and use of sources to
support ideas in the
writing.

Sources are not cited
according to required
documentation (e.g.,
APA).