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Proposal A New Factory Assume discount rate or weighted average cost of capital 10%- Ignore all taxes and depreciation. A company wants to build a...
Proposal A New Factory
Assume discount rate or weighted average cost of capital 10%- Ignore all taxes and depreciation.
A company wants to build a new factory for increased capacity. Using NPV method of capital budgeting. Building new factory will increase capacity by 30%
Current capacity is $10 million of sales with 5% profit margin
Factory Cost $10 million to build
New capacity will meet company need for 10 years
The factory is worth $14 million over 10 years. Should this project be accepted or rejected
Explain effect of higher and lower cost of capital on firm's long-term financial decision.
Apply calculations analyze the use of capital budgeting techniques in strategic financial management
