Exhibit 11-1 a Company Is Considering Investing $1.2M in a Facility to Facility

question 26

Essay

Exhibit 11-1
A company is considering investing $1.2M in a facility to manufacture a new product. The product will have a five year life, after which the facility will be shut down. A pro forma cash flow sheet for this project, with forecasted production levels, unit prices, and production costs, is shown below:

-[Part 1] Refer to Exhibit 11-1.What is the deterministic next present value (NPV)of the project,including the required investment,assuming a 10% discount rate

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Definitions:

Carrying Value

The book value of an asset as shown on the balance sheet, calculated as the original cost minus accumulated depreciation, impairment charges, or amortization.

Selling Price

The amount of money a buyer pays to purchase a product or service from a seller.

Restructuring Gain

Income recognized from the process of reorganizing the legal, ownership, operational, or other structures of a company to make it more profitable or organized.

Stamping Machine

A machine used in the manufacturing process to imprint or shape items with specific designs or patterns.