Assignment 2: Mid-Term Assignment: Accept or Reject the Project
In this assignment, you will undertake calculations in order to evaluate a project, and decide if it should be accepted or rejected.
Texas Roks, Inc. is considering a new quarry machine. The costs and revenues associated with the machine have been provided to you for analysis:
Cost of the new project
Estimated unit sales in year 1
Estimated unit sales in year 2
Estimated unit sales in year 3
Estimated sales price in year 1
Estimated sales price in year 2
Estimated sales price in year 3
Variable cost per unit
Annual fixed cost
Additional working capital needed
3 years straight-line method, no salvage value
Texas Rok’s tax rate
Texas Rok’s cost of capital
Calculate operating cash flow and the change in net working capital.
Determine the NPV and IRR of the project.
Should the company accept or reject the project based on the NPV? Why?
Should the company accept or reject the project based on the IRR? Why?
What is your final accept or reject decision? Why?
What is the payback period for this project? Would this influence your decision to accept or reject?
Submit your findings to the above questions in a Microsoft Word or Excel document to the W3: Assignment 2Dropboxby Tuesday, December 9, 2014. Use an Excel document to illustrate your calculations.
Name your document(s) SU_FIN3030_W3_A2 _LastName_FirstInitial.
Assignment 2 Grading Criteria Maximum Points
Correctly calculated the operating cash flow and the change in net working capital.
Correctly calculated the NPV
Correctly calculated the IRR. 50
Correctly calculated the payback period.
Made the correct accept/reject decision and explained why.
Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; displayed accurate spelling, grammar, and punctuation.
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