• March 19th, 2016

New Factory

Paper, Order, or Assignment Requirements

A company wants to build a new factory for increased capacity. Using the net present value (NPV) method of capital budgeting, determine the proposal’s appropriateness and economic viability with the following information:

• Building a new factory will increase capacity by 30%.
• The current capacity is $10 million of sales with a 5% profit margin.
• The factory costs $10 million to build.
• The new capacity will meet the company’s needs for 10 years.
• The factory is worth $14 million over 10 years.
Prepare a 700- to 1,050-word report explaining your calculations and findings. Answer the following in your report:
Apply calculations to determine the proposal’s appropriateness and economic viability.
Explain the effect of a higher or lower cost of capital on a firm’s long-term financial decisions.
Analyze the use of capital budgeting techniques in strategic financial management.
Format your report consistent with APA guidelines.

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