# At least 12 pages report, the request are as following

Fin 12 Term Project

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This project is a major component of the WAC portion of this course, and a significant

portion of your final grade. The paper may be completed in groups of no more than four

students (no exceptions). It should be typed and double-spaced and be between 12 and

15 pages in length. The report should contain the following sections;

Executive Summary (one page)

Statement of Problem

Analysis & Methodology

Discussion of Results

Conclusion

Tables and Charts should be included in the body of the paper.

The paper will be graded on (i) its professionalism, e.g., grammar, presentation, and (ii)

the correctness of its analysis. The project is due on June 11, 2009. It will be returned on

June 15 with detailed comments regarding possible revisions.

Assignment

Rediform Concrete is considering a \$5 million capital investment for a factory to

manufacture formed concrete products, such as patio stones, mobile home stones, and

lawn decorations. The proposed factory will generate annual sales between \$2 million

and \$5 million. After-tax fixed costs are \$500k per year and after-tax variable costs are

50% of sales. Therefore, annual after-tax cash flow for the project is (0.5)Sales.

The expected life of the project is 5 years and the salvage value depends on land prices

at the end of five years. The factory would be built on Palmetto Rd., near the Sunshine

Expressway. A new freeway exit is being planned for the Sunshine Expressway. If the

exit is built at Palmetto Rd., the salvage value of the factory will be \$3 million. If the exit

is located at one of the two competing roads, the salvage value will be \$1 million. Ignore

Other data: The firm has estimated the level of systematic risk to be

expected return on the market is

Prepare an analysis that examines the economic break-even for this project. Also,

prepare an analysis that examines the project’s sensitivity to salvage value.

RM =12%

ß P = 0.75

, the

RF = 4%

, and the risk-free rate of return is