Fin305 project spring 2014 | Business & Finance homework help

CGX Transmitters is developing a 2nd generation optical transmitter. Their finance department is on a team-building retreat in the Pocono Mountains. The CEO needs the capital budget on his desk tonight. He knows that you are taking FIN 305W, and that you can complete the budget that the finance group started. You have the following information:
– The project will last for four years.
– The initial investment in equipment is $24 million. The firm will use a straight line depreciation schedule in years one to four, with the book value of the equipment going down from $24 million in year zero down to a book value of $4 million in year four. (Hint: Don’t forget about the after-tax salvage value of equipment in your NPV calculations!)
– The salvage value (re-sale value) of the equipment will be $8 million in year four.
– The firm spent $14.5 million on R&D last year in order to research the technology behind the 2nd generation transmitter.
– The accounting department will assign a $0.2 million administration costs per year for years one to four. You check with them, and they give you the following breakdown: $75,000 a year for accounting services to produce paperwork necessary to run the project and comply with federal and state regulations, and $125,000 towards the overall costs of maintaining the firm’s headquarters. Even though the headquarters will not be involved with running this project, they argue that the cost of the headquarters has to be spread over all existing projects. Both numbers are net of taxes (i.e. taxes have already been applied).
– If you undertake this project, operating income before tax of the 1st generation optical transmitter will decline by an annual amount of $0.6 million for each of the next four years – The tax rate is 35%.
– The cost of capital is 9%.
– Assume that the firm’s other projects yield a positive income before tax. 

Don't use plagiarized sources. Get Your Custom Essay on
Fin305 project spring 2014 | Business & Finance homework help
Just from $13/Page
Order Essay

Additionally, the following information is compiled by the accounting and marketing department (in $ million):

Year Net working capital Sales Cost of Goods Sold
0 1.3 0 0
1 2.8 9 4
2 4.2 10 4
3 3.8 15 6
4 0 13 5

Question 1 (60 points)
Provide a complete pro-forma analysis with the project OCF, taxes, capital investment, side effects and project net cash flow in year 0, 1, 2, 3, 4. Provide all steps and underline your final net cash flow answers. The pro-forma analysis should be well organized, complete, and readable so that it can be passed by to the CFO’s desk tomorrow.

Question 2 (10 points)
What is the NPV of the project? Should the project be started? 

Question 3 (10 points)
What are the project payback period, discounted payback period, and IRR?

Question 4 (10 points)
What will be the NPV if the company uses accelerated depreciation instead (3 year MACRS): the $20 million depreciation will be applied using the 3 year MACRS formula:
Year 3 year MACRS
0 0%
1 33.33%
2 44.45%
3 14.81%
4 7.41%
Hint: You do not need to re-do the complete pro-forma analysis to find the NPV with this alternative depreciation schedule.

Question 5 (10 points)
The CFO is not completely sure of the effect of this project on operating income before tax of the 1st generation optical transmitter. He asks for NPV projections for the following two scenarios: (A) if the operating income before tax of the 1st generation optical transmitter does not decline, and (B) if it suffers a much sharper decline by $1.5 million for each of the next four years.


Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our Guarantees

At, we value all our customers, and for that, always strive to ensure that we deliver the best top-quality content that we can. All the processes, from writing, formatting, editing, and submission is 100% original and detail-oriented. With us, you are, therefore, always guaranteed quality work by certified and experienced writing professionals. We take pride in the university homework help services that we provide our customers.

Money-Back Guarantee

As the best homework help service in the world, 111 Papers ensures that all customers are completely satisfied with the finished product before disbursing payment. You are not obligated to pay for the final product if you aren’t 100% satisfied with the paper. We also provide a money-back guarantee if you don’t feel that your paper was written to your satisfaction. This guarantee is totally transparent and follows all the terms and conditions set by the company.

Read more

Zero-Plagiarism Guarantee

All products that we deliver are guaranteed to be 100% original. We check for unoriginality on all orders delivered by our writers using the most advanced anti-plagiarism programs in the market. We, therefore, guarantee that all products that we submit to you are 100% original. We have a zero-tolerance policy for copied content. Thanks to our strict no plagiarized work rule, you can submit your homework to your professor without worrying.

Read more

Free-Revision Policy

TThis is one of the most cherished courtesy services that we provide to help ensure that our customers are completely satisfied with our finished products. Delivering the best final product to our customers takes multiple inputs. prides itself on delivering the best university homework help services in the writing industry. And, in part, our free revision policy is how we do it. What’s more, all our revisions are 100% free without any strings attached.

Read more

Privacy Policy

Client privacy is important to use. We know and understand just how important customers value their privacy and always want to safeguard their personal information. Thus, all the information that you share with us will always remain in safe custody. We will never disclose your personal information to any third party or sell your details to anyone. 111 Papers uses the most sophisticated, top-of-the-line security programs to ensure that our customers’ information is safe and secured.

Read more

Fair-Cooperation Guarantee

Placing your order with us means that you agree with the homework help service we provide. We, in turn, will endear to ensure that we do everything we can to deliver the most comprehensive finished product as per your requirements. We will also count on your cooperation to help us deliver on this mandate. Yes, we also need you to ensure that you have the highest-quality paper.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages