Fruit-To-Go (FTG) processes fruit for shipping overseas.

Fruit-To-Go (FTG) processes fruit for shipping overseas.

FTG commissioned a study to look into the feasibility of changing the packaging of the fruit from cans to sealed bags. The Consultant charged $45000 for the report.

The report concluded that the new packaging will increase sales and reduce some operating costs.

The new packaging machinery will cost $1100000. The new machine is expected to last 5 years. The Taxation Office advise the life of the machine, for tax purposes, is 4 years.

The old canning machinery was purchased 2 years ago for $800000 and was being depreciated at $200000 and will be for the next 2 years. The old machine could be sold today for $130000. In 5 years it will be worth nothing.

Installing the new machine will require staff training (a tax deductible expense) of $35000 before production can commence. Due to the lower cost of the bags Inventory required will be reduced by $100000 for the life of the project.

The new sales of bagged fruit is expected to be $750000 in Year 1 rising by 20% for 1 year then 10% for the rest of the life of the project. Variable Costs associated with the new packaged fruit are 40% of sales.

Canned fruit production will be discontinued. Sales of canned fruit were static at $400000 with variable costs of $200000 (50% of Sales).

The new equipment is very hi-tech. Maintenance costs are expected to be higher at $40000 per year. Maintenance costs on the old machine were $30000 per year.

The lighter packaging will reduce annual freight cost significantly from $250000 to $140000 per year.

Fixed costs are expected to remain at $450000 per year.

At the end of the project the new machinery can be sold for $350000.

Notes:

FTG will borrow the full Year 0 funds using a secured five-year interest-only loan at an interest rate of 10% per annum to finance the new equipment.

The company tax rate is 30%.

The required rate of return is 12.5%.

Requirement:

You are required to answer and to conduct a capital budgeting analysis of the company. You must determine:

1. The cash flows at the start (15Marks)

2. The cash flows over the life (20Marks)

3. The cash flows at the end (10 Marks)

4. The appropriate discount rate (5 Marks)

5. The NPV of the project (5Marks)

6. The IRR of the project(5Marks)

7. The PI of the project(5Marks)

8. The payback of the project(5Marks)

9. A brief recommendation (5Marks)

10. Please give short explanation on how to make investing decision. (about 500 words) (25Marks)

find the cost of your paper

Strategic Management Project

Assignment Content Review the Strategic Management Project Background and your strategic management research journal entries from Weeks 1–4. Create a 10-slide presentation for Caterpillar Inc. leadership in which you summarize your key findings, propose….

Case Problem Investment Strategy

Case Problem Investment Strategy J. D. Williams, Inc. is an investment advisory firm that manages more than $120 million in funds for its numerous clients. The company uses an asset allocation model that recommends the portion of each client’s portfolio to be invested in a growth stock fund, an income fund and a money market fund. To maintain diversity in each client’s portfolio, the firm places limits on the percentage of each portfolio that may be invested in each of the three funds. General guidelines indicate that the amount invested in the growth fund must be between 20% to 40% of the total portfolio value. Similar percentages for the other two funds stipulate that between 20% to 50% of the total portfolio must be in the income fund and at least 30% of the total portfolio value must be in the money market fund.   In addition, the company attempts to assess the risk tolerance of each client and adjust the portfolio to meet the needs of the individual investor. For example, Williams just contracted with a new client who has $800,000 to invest. Based on an evaluation of the client’s risk tolerance, Williams assigned a maximum risk index of 0.05 for the client. The firm’s risk indicators show the risk of the growth fund at 0.10, the income fund at 0.07 and the money market fund at 0.01. An overall portfolio risk index is computed as a weighted average of the risk rating for the three funds where the weights are the fraction of the client’s portfolio invested in each of the funds. Additionally, William’s is currently forecasting annual yields of 18% for the growth fund, 12.5% for the income fund and 7.5% fir the money market fund. Based on the information provided, how should the new client be advised to allocate $800,000 among the growth, income and money market funds? Develop a linear programming model that will provide the maximum yield for the portfolio. Use your model to develop a managerial report.   Managerial Report: a.Recommend how much of the $800,000 should be invested in each of the three funds. What is the annual yield you anticipate for the investment recommendation change? b.Assume that the client’s risk index could be increased to 0.055. How much would the yield increase and how would the investment recommendation change? c.Refer again to the original situation where the client’s risk index was assessed to be 0.05. How would your investment recommendation change if the annual yield for the growth fund were revised downward to 16% or even to 14%? d.Assume that the client expressed some concern about having too much money in the growth fund. How would the original recommendation change if the amount invested in the growth fund is not allowed to exceed the amount invested in the income fund? e.The asset allocation model you developed may be useful in modifying the portfolios for all the firm’s clients whenever the anticipated yields for the three funds are periodically revised. What is your recommendation as to whether use of this model is possible?  

Case Analysis

You can view the article (the case), “The Man Who Got Honeywell’s Groove Backt”, by linking to the course EReserves  Follow the Case Analysis Outline given in your syllabus. This is….