Discuss which costs are relevant for the evaluation of this project and which costs are not…. 1 answer below »

Are you stressed by poor grades and tight deadlines? We have your back at expert-tutor.net. We can do this or a different assignment for you at an affordable price. Use customdissertations.org writing services to score better and meet your deadlines.


Order a Similar Paper Order a Different Paper

Your tasks:

Based on the information in the case study, Catherine has asked you to write a report to TMR’s management

advising them as to the best course of action regarding this project. Your report should address the following

specific questions asked by TMR’s management:

1. Discuss which costs are relevant for the evaluation of this project and which costs are not. Your

discussion should be justified by a valid argument and supported by references to appropriate sources

2. How are possible cannibalization and opportunity costs considered in this analysis?

3. Determine the initial investment cash flow.

4. Estimate all cash flows associated with the project over 5 years. It is assumed that where relevant,

capital expenditures and marking costs are expended throughout the year, while cash flows relating

to revenue and operating costs occur at the end of the year. You will need to broadly describe the

method used for determining those cash flows.

5. Calculate the project’s payback period. Assuming the business could be sold at the end of the five

years for $1 million. This figure includes the value of the car fleet, premises and capital gain from the

business. Ignore any possible tax consequences of selling the business and also ignore the time value

of money for this particular calculation. Briefly comment on your results

6. Estimate the Net present value (NPV) of the project, assuming that the initial investment is entirely

funded by equity capital (retained earnings and new share issue). could be sold at the end of the five

years for $1 million. This figure includes the value of the car fleet, premises and capital gain from the

business. Ignore any possible tax consequences of selling the business. Briefly comment on your

results and make appropriate remarks on the assumptions made for these calculations if necessary.

7. Using sensitivity analysis, recalculate NPV using the scenario of a decrease in project sales by 10%

annually. Briefly comment on your results.

8. In view of your answer to Point 5 to point 7 above, advise TMR’s management as to whether they

should go ahead with the investment project. In your recommendations, you may wish to suggest

possible refinements in the method used for evaluating this project.

Attachments:

Writerbay.net

We offer CUSTOM-WRITTEN, CONFIDENTIAL, ORIGINAL, and PRIVATE writing services. Kindly click on the ORDER NOW button to receive an A++ paper from our masters- and PhD writers.

Get a 10% discount on your order using the following coupon code SAVE10


Order a Similar Paper Order a Different Paper