The VP-Operations/Supply Chain who championed this project had already discussed the design and fabrication of reinforced stainless steel racks with a local machine shop. The racks were custom-designed for easy load / transport / unloading of various sized plants and their containers. Open rack tops would allow sunlight to display the plants at the retail facility and keep them healthy. Mounted on over-sized industrial wheels, the racks would tolerate regular water exposure without rusting. The machine shop hoped to fill excess production capacity and promised quick delivery. They estimated that at the current cost of stainless steel, they could supply 3000 racks for a volume price of $250 per rack. The VP Operations had collaborated with the VP Sales on this project. Together they estimated that the new racks would be quickly embraced by the major retail accounts, and could boost sales margins by $120,000 per year, starting upon full delivery. Further, the Salesman reminded Elizabeth that this benefit could be expected to grow with inflation. The rack supplier offered to provide maintenance and repair service for an additional $16,000 per year (fixed) starting one year after the racks have been delivered; the maintenance fee will increase yearly by 3.5%. The VP-Operations believed that the high-quality racks, combined with effective maintenance services, should extend their useful lives to a full 12 years. All the racks will be delivered at the same time which will occur 1 year after the project is approved. Perform a Payback Period and Discounted Cash Flow (NPV)analysis and Internal rate for proposed project. Explain the calculation in Excel Note: ( Please do not use Chat Gpt)
The VP-Operations/Supply Chain who championed this project had already discussed the design and fabrication of reinforced stainless steel racks with a local machine shop. The racks were custom-designed for easy load / transport / unloading of various sized plants and their containers. Open rack tops would allow sunlight to display the plants at the retail facility and keep them healthy. Mounted on over-sized industrial wheels, the racks would tolerate regular water exposure without rusting.
The machine shop hoped to fill excess production capacity and promised quick delivery. They estimated that at the current cost of stainless steel, they could supply 3000 racks for a volume price of $250 per rack. The VP Operations had collaborated with the VP Sales on this project. Together they estimated that the new racks would be quickly embraced by the major retail accounts, and could boost sales margins by $120,000 per year, starting upon full delivery. Further, the Salesman reminded Elizabeth that this benefit could be expected to grow with inflation. The rack supplier offered to provide maintenance and repair service for an additional $16,000 per year (fixed) starting one year after the racks have been delivered; the maintenance fee will increase yearly by 3.5%. The VP-Operations believed that the high-quality racks, combined with effective maintenance services, should extend their useful lives to a full 12 years. All the racks will be delivered at the same time which will occur 1 year after the project is approved.
Perform a Payback Period and Discounted Cash Flow (NPV)analysis and Internal rate for proposed project. Explain the calculation in Excel
Note: ( Please do not use Chat Gpt)
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