Given the provided 5 year cash inflows below calculate the project NPV. The discount rate will be 12% for the project. Show the project NPV with and without overhead (i.e. you need to calculate NPV using WBS costs first, then recalculate NPV after you add-in overhead). However, your recommendation should be based on total project cost (WBS activity cost + overhead). Provide a recommendation to approve / reject the project ... include your rationale Year 1 Year 2 Year 3 Year 4 Year 5 425000 425000 425000 425000 425000 Activity Cost WBS Item R&D Project Development Need Survey $ 64,000 Set Product Specs $ 57,600 Shelf life Report $ 19,200 Nutrition Report $ 9,600 Select Fruit Suppliers $ 9,600 Initial Production Equipment Rehab $ 528,000 Production Trials $ 235,200 Quality Trials $ 125,000 Quality Metrics $ 17,000 Quality Training $ 200,000 Distribution Market Testing $ 96,000 Package Design $ 31,200 Select Distributors $ 80,000 Legal Complete FDA Certification $ 60,000 Register Trademark $ 14,400 Prepare Product Launch S 268,800 Overhead = 20% total cost of WBS activities Remember that the initial investment (outflow) for NPV calculation is total WBS costs then recalculate NPV using total WBS costs + Overhead

Given the provided 5 year cash inflows below calculate the project NPV. The discount rate will be 12% for the project. Show the project NPV with and without overhead (i.e. you need to calculate NPV using WBS costs first, then recalculate NPV after you add-in overhead). However, your recommendation should be based on total project cost (WBS activity cost + overhead). Provide a recommendation to approve / reject the project ... include your rationale Year 1 Year 2 Year 3 Year 4 Year 5 425000 425000 425000 425000 425000 Activity Cost WBS Item R&D Project Development Need Survey $ 64,000 Set Product Specs $ 57,600 Shelf life Report $ 19,200 Nutrition Report $ 9,600 Select Fruit Suppliers $ 9,600 Initial Production Equipment Rehab $ 528,000 Production Trials $ 235,200 Quality Trials $ 125,000 Quality Metrics $ 17,000 Quality Training $ 200,000 Distribution Market Testing $ 96,000 Package Design $ 31,200 Select Distributors $ 80,000 Legal Complete FDA Certification $ 60,000 Register Trademark $ 14,400 Prepare Product Launch S 268,800 Overhead = 20% total cost of WBS activities Remember that the initial investment (outflow) for NPV calculation is total WBS costs then recalculate NPV using total WBS costs + Overhead

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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