Envelope

Envelope Machine Proposal cozy cards should hold in the envelope machine that would enable them to produce their persist envelopes. Currently the purchase of envelopes is a significant cost of genials operations, costing the comp any(prenominal) $1.5 million a year. By saving the envelope manufacturing in house comradely could greatly falloff their costs and increase the value of the star sign as the visit has a positive net present value. For the NPV synopsis it was untrue that production would non decrease over meter and the expenses would prevail constant, implying that the annual increase in profits provided by the investing would remain at $218,000 for all 8 old get along of the machine life. As no residual value was attached for the machine after the 8 eld of production it was fictitious the machine would no longer be of any value. The depend on per unit of return for the project was off-key to be sour up to the weight average cost of capital for the firm as a whole. Cost of equity was calculated by taking the presentout to shareholders in 1987 of $99,000 (Payout = Net income retained earnings = 784,000 (1,990,000 1,305,000) = $99,000) split up by the grocery value of the firm plus the intercommunicate growth in dividends.

Although the firm does not intend to pay out any dividends in the next three years it is assumed that in the long-run dividends will be change magnitude by a rate equal to the growth in sales which is predicted to be 20%. The proportion of debt financing was assumed to be equal to long-term debt obligations. Although the ba nk loans would also be interest attitude de! bt as they were only taken temporarily around steep sales periods, which the end of December would be, they were not included. The NPV of the project was put to be positive being $447,726.64. This implies that this is a highly gainful project that will increase shareholder value by $447,726.64 and it should therefore be implemented. As Friendly Cards is experiencing pecuniary problems at this point in clipping the...If you want to bring on a full essay, revise it on our website: OrderCustomPaper.com

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