Prepare a cashflow to forecast and use investment appraisal techniques to calculate Net Present Value (NPV), Return on Capital (ROC) and Payback Period (PB) for the BioMet face pay project.Do the project should go ahead and why? Initial project set-up costs are estimated to be SEK15m (year 0 - 2023).Further estimated operating costs and projected revenues are as follows:Operating costs - Years 1-5 (2024-2028)All figures are in millions of SEK. Further costs are presented in the table below. No inflationaryadjustmentshavebeenmadeinthetable.YearY1Y2Y3Y5Operational costs6666Maintenance costs4444Tech update costs3333Important points to note (after year 1):• Operational costs are estimated to increase by 3.5% per year• Maintenance costs are estimated to increase by 2.8% per year• Tech update costs are estimated to increase by 2% per yearRevenue - revenue projections have been estimated as are follows:Y1Y2Y3Y4Y5YearRevenue (merchantfees)820222530The discount rate used by BioMet is 4.5% per annum.Task1. Prepare a cashflow forecast and use investment appraisal techniques to calculate NetPresent Value (NPV), Return on Capital (ROC) and Payback Period (PB) for the BioMet facepay project.2. Show your workings in SEKm over the 6-year period (2023-2028)3. Comment on the financial implications of the results and indicate if you feel the projectshould go ahead and why.Y4643 Initial project set-up costs are estimated to be SEK15m (year 0 - 2023).Further estimated operating costs and projected revenues are as follows:Operating costs - Years 1-5 (2024-2028)All figures are in millions of SEK. Further costs are presented in the table below. No inflationaryadjustmentshavebeenmadeinthetable.YearY1Y2Y3Y5Operational costs6666Maintenance costs4444Tech update costs3333Important points to note (after year 1):• Operational costs are estimated to increase by 3.5% per year• Maintenance costs are estimated to increase by 2.8% per year• Tech update costs are estimated to increase by 2% per yearRevenue - revenue projections have been estimated as are follows:Y1Y2Y3Y4Y5YearRevenue (merchantfees)820222530The discount rate used by BioMet is 4.5% per annum.Task1. Prepare a cashflow forecast and use investment appraisal techniques to calculate NetPresent Value (NPV), Return on Capital (ROC) and Payback Period (PB) for the BioMet facepay project.2. Show your workings in SEKm over the 6-year period (2023-2028)3. Comment on the financial implications of the results and indicate if you feel the projectshould go ahead and why.Y4643

Taking into consideration the increase in costs at their respective rates we get - YEAR OC…

Initial project set-up costs are estimated to be SEK15m (year 0 - 2023). Further estimated operating costs and projected revenues are as follows: Operating costs - Years 1-5 (2024-2028) All figures are in millions of SEK. Further costs are presented in the table below. No inflationary

Initial project set-up costs are estimated to be SEK15m (year 0 - 2023). Further estimated operating costs and projected revenues are as follows: Operating costs - Years 1-5 (2024-2028) All figures are in millions of SEK. Further costs are presented in the table below. No inflationary

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Need some assistance with this
ECONOMICS (UPVOTE WILL BE GIVEN. CHOOSE THE CORRECT ANSWER. NO LONG EXPLANATION NEEDED. BOX THE FINAL ANSWER.) If the present worth of a project is given and you want to know its annual equivalent value, which working equation shall you use? A. PW = AW(P/A, i%,N) B. AW(%) = R – E – CR(i%) C. AW = PW(A/P, i%,N) D. AW = PW(P/A, i%,N)
Is it important to conduct a thorough investment analysis before accepting to undertake and agricultural project? YES or NO. Provide motivation for your answer.
3 Question 16 It makes no difference in the final answer if a rate of return equation is expressed in terms of P, A, or F. True or False Question 24 In the case of independent projects, only those projects for which the net present value is greater than or equal to 0 are retained. Options for question 24: True or False
You have decided to open a microbrewery selling university-themed beers as one of your product lines. You need to conduct a breakeven analysis of sales and price. You know your fixed costs but based on your marketing plan you are not sure of pricing and sales. Your company MARR is 5%, and fixed costs include an initial capital investment of $250,000 with fixed annual expenses of $100,000. Use a 5-year planning horizon and assume that these expenses will not grow with inflation. a. Draw the cash flow diagram. b. Populate the following table and plot the NPW results in a meaningful plot. (Make sure you label your axis, and your plot should contain three curves.) c. Make a pricing recommendation as a function of sales. You would like to make a minimum of $100,000 for your work on this project.
A9. calculate the AW and PW of both project A and project B
ENGINEERING ECONOMY RATE WILL BE GIVEN. WRITE THE COMPLETE SOLUTIONS/EXPLANATION LEGIBLY OR TYPEWRITTEN. GIVE STRAIGHT TO THE POINT EXPLANATION. Your company presently uses a crew of its own employees for all major maintenance. On average, 44 major repairs are performed each year at 20 lost production hours per repair. Keeping the crew costs $1,300,000 per year plus any lost production cost. Lost production costs are estimated at $2,500 per hour. Your company is considering replacing its in-house maintenance work with an outside company (Ajax) working under an annual maintenance contract. This proposal will pay Ajax $2,180,000 per year but your company will still have to pay for all lost production time. Ajax claims that the time per repair will decrease because of the contractors’ substantial maintenance experience. Assuming the number of major repairs and the cost of lost production time remain the same, how much time per repair is the maximum allowable for Ajax to be the…
a. Find the breakeven market value.b.Find the breakeven annual expense.C.Is the decision more sensitive to changes in market value or annual expense? How doyou know?
A common stock just paid a dividend of $1.2. The dividend is expected to growat 8% for 5 years, then it will grow at 4% in perpetuity. Calculate the stock value. Thediscount rate is 12%. (Hint: dividend states in 3 decimals and price states in 2 decimals)
You are considering an investment project with the financial information provided below. Suppose the company is most concerned about the impact of its price estimate on the project's rate of return. How would you address this concern? The break-even value of unit price is ?
Which of the following statements is incorrect?(a) Holding on to cash is the most risk-free investment option.(b) To maximize your return on total assets (ignoring financial risk), you mustput all your money into the same type of investment category.(c) Diversification among well-chosen investments can reduce market volatility.(d) Broader diversification among well-chosen assets always leads to a higherreturn without increasing additional risk.
There are four steps for the selection of capital investment projects 1) Generate alternative capital investment project proposals. 2) Estimate cash flows for each project proposal. 3) Evaluate and choose which investment project to undertake 4) When completed review the investment project to see which assumptions about the project were correct What is the point of looking at the assumptions made after the investment was completed? Would it be better if the review was undertaken at earlier intervals, such as the mid-way point or sooner?