A guide to assignment on the Case study on WePROMOTE company. Financial analysis including Net present value method, Annual after-tax cash flows with tabular presentation for both. Clear explanation with recommendations.
This case study is a continuation of the previous week focusing on WePROMOTE Company.
Last week, we have analyzed the profitability of two alternative cases and make
recommendations. WePROMOTE is a company that provides promotional materials for
businesses. The project we need to analyze is the manufacturing of a unique case for
smartphones. The cases should be durable, attractive, and fit all models of the smartphone.
Additionally, it will have the logo of our client that is a local company to enhance public
relations.
Financial Data
The final data regarding the project has been collected and compiled. The equipment will cost
$70,000 and is incurred at the beginning of the year. The project is expected to have annual cash
revenue of $30,000 and annual cash outflows of $11,000. The equipment is expected to
depreciate within 5 years on a straight-line basis with no salvage value. The tax rate will be 30%
and the discount rate is 6%.
Financial Analysis
We have to do an NPV analysis and based on the results make recommendations. Net present
value (NPV) is a common method of analyzing the viability of projects when making capital
budgeting decisions or investment analysis (Daryanto & Primadona, 2018). It considers the cash
flows over the lifespan of the project and takes into account the depreciation method used on the
project. We have to perform a few calculations before doing an NPV analysis. First, we calculate
the depreciation values and the depreciation tax savings. Then we calculate the annual net cash
flows.
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