MT217 - Unit 8 Challenge Problem

   

 

Unit MT 217 Florida. ago, the years, th of variou departm

One of t assistan been ex and is p item, tec compari all the fe The com for the n

MT 217 the oper 70,000, respectiv be purch schedule

Net work NWC wi rate.

MT 217’ costing

Sherry h

1. W p

2. W 3. W

t 8 Ch Electronics The compa

e company o he company us electroni

ment.

the major re nt (PDA). M xcellent. The reprogramm chnology ch son with ne

eatures of t mpany has p new PDA.

can manuf ration are e 80,000, 10 vely. The u hased for $ e.

king capital ill be recove

’s capital st 16%,

has asked D

What is MT roject?

What is the What is the

Unit 8    [Fi

hallen s is a midsiz any preside originally re y expanded ic items. Do

evenue-pro T 217 curre e PDA is a med to play hanges rap ewer mode he existing performed

facture the estimated to 0,000, 85,0

unit price of 16.5 million

l investmen ered at the

tructure is 4

Doug to pre

217’s WAC

IRR of the NPV of the

nance] 

nge Pr zed electro

ent is Sherry epaired rad d into manu oug Brown

oducing item ently has on unique item

y Jimmy Bu idly, and th ls. MT 217 PDA but a a marketing

new PDA fo o run $4.5 m 000, and 75 the new PD

n and will b

nt for the PD projects en

40% debt w

epare a rep

CC, which w

project? project, ba

roblem onics manuf y Jones. W ios and oth

ufacturing a has been h

ms manufac ne PDA mo m in that it c uffett music. e current P developed dds new fe g study to d

or $200 eac million per y 5,000 per e DA will be $ e depreciat

DAs will be nd. MT 217

with an after

ort that ans

will be used

ased on the

m facturer loc When it was her househo and is now a hired by the

ctured by M odel on the comes in a . However,

PDA has lim a prototype

eatures suc determine t

ch in variab year. The e ach year fo $340. The n ted on a 5 y

$6,000,000 7 has a 35

r-tax cost of

swers the fo

d as the req

e WACC (re

cated in Me s founded o old applianc a reputable

e company's

MT 217 is a market, an variety of t as with any

mited featur e for a new h as cell ph the expecte

ble costs. F estimated sa or the next f necessary year straigh

0 this year. percent cor

f 8% and 6

ollowing qu

uired rate o

equired rate

lbourne, over 70 yea ces. Over t

e manufactu s finance

personal d nd sales hav tropical colo y electronic

res in w PDA that hone capab ed sales figu

Fixed costs ales volume five years, equipment ht-line

. Of course rporate tax

0% equity

uestions:

of return for

e of return)?

1 

ars the urer

igital ve ors c

has bility. ures

for e is

can

e

r this

?

Unit 8    [Finance] 

   

2   

If you were Doug, how would you answer the questions? Submit your completed assignment to the Dropbox.