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;

 

Table of Contents

 

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

 

depreciation in your calculations.

 

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