CTU Apix Coffee Packaging Diversification Project Evaluation Slides Task

Question Description

This week you will determine the profitability of a project by determining it’s NPV and IRR. Calculate the IRR and NPV as you did last week in your spreadsheet with new numbers. You do not need to turn in the spreadsheet, though you can include a screenshot in your PPT. You must include the updated results of last week’s IP. If you did not have them correct, refer to your feedback. You must come to the correct conclusion in slide #8.

Apix is considering coffee packaging as an additional diversification to its product line. Here’s information regarding the coffee packaging project:

  • Initial investment outlay of $40 million, consisting of $35 million for equipment and $5 million for net working capital (NWC) (plastic substrate and ink inventory); NWC recoverable in terminal year
  • Project and equipment life: 5 years
  • Sales: $27 million per year for five years
  • Assume gross margin of 50% (exclusive of depreciation)
  • Depreciation: Straight-line for tax purposes
  • Selling, general, and administrative expenses: 10% of sales
  • Tax rate: 35%

Assume a WACC of 10%.

Week 5 Individual Project assignment:

Should the coffee packaging project be accepted? Why or why not? Compute the project’s IRR and NPV.

In addition, answer the following questions:

— Do you believe that there was sufficient financial information to make a solid decision on what to do?

— Was there further financial information that you required that was not provided to you?

— What financial figure do you believe was the determinant to your decision and why?

— How would you be able to apply this particular financial information to other situations?

— Discuss risk methodologies used in capital budgeting.

  • Individual Project assignment due Wednesday
  • Submit a PowerPoint presentation of 6-12 slides.
  • Speaker notes of 150 words minimum per slide
  • Organize your slides as follows:

Slide 1: Titles.

Slide 2: Overview of Apix. Summary of company’s assets, total profit, cash flow from operating activities, cash flow from investing and financing.

Slide 3: Summary of last week’s expansion project. Provide previous spreadsheet results. Discuss them.

Slide 4: Provide your new NPV and IRR calculations and results for the coffee packaging project. Discuss what has changed.

Slide 5: Do you believe that there was sufficient financial information to make a solid decision on what to do? Was there further financial information that you required that was not provided to you? What financial figure do you believe was the determinant to your decision and why?

Slide 6: How would you be able to apply this particular financial information to other situations? Discuss risk methodologies that are used in evaluating capital budgeting.

Slide 7: What is the biggest risk for the company, and what can be done to minimize the risk?

Slide 8: Summary: Make a recommendation. Should the coffee packaging project be accepted as an additional diversification to its product line? Why or why not?

Slide 9: References.

20201104134508npv_irr_assignment__1__unit_5_corrected_formula.xls

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