The Company is considering a new turkey farm to service its western region stores. Currently the stores require 900,000 turkeys per year at a cost of $10 per bird. Managers believe that their new farm will lower the cost per bird to $7.50 while maintaining the average selling price of $13 per bird. Shipping expenses will increase from $1 to $1.50 per bird. Inventory will need to increase by $150,000 live turkeys. Additionally labor cost will increase $500,000 annually. It will cost $2,000,000 to purchase land and $1,500,000 for constructing building and equipment. Building and equipment are depreciated on the straight line method. After 7 years, the company expects to sell the land for $1,500,000 and the building and equipment at their salvage value of $600,000. The companies marginal tex rate is 40%
PLEASE SHOW EXCEL WORK FLOW
1. Calculate the initial outlay (IO) annual after tax cash flow for each year (ACF) and terminal cash flows (TCF) for this project.
2. If the WACC is 12% answer the following questions:
- 3.Calculate the payback period
- 4. Calculate the discounted payback period.
- 5 Calculate the NPV
-6 Calculate the PI
-7. Calculate ethe IRR
-8 Calculate the MIRR