lockheed caso

8/17/2019 Lockheed Caso

1/8

1.

(A) The payback is 35,000/5,000= 7 years

Computation o the !"# $

15!"#= %35,000 & '' 5,000 / ( 1 & 1*+) 15i=1

!"# = -% 7. 7

Computation o the 22 $

150= %35,000 & '' 5,000 / ( 1 & 22) 15i=1

22= 11.+

The !"# o this proect is ne4atie an6 the 22 is o8er then the Cost o Capita (1*+)2ainbo8 pro6ucts shou6n'9':;)

>ase6 on the perpetuity ormua 8e can compute the "# in this case $

Computation o the "# $

"#= Cash ?o8 per year/ cost o capita)=,500 / 0.1*= -37,500


!"#= %nitia inestment & "#= %35,000 & 37,500!"#=-*,500

2ainbo8 pro6ucts cou6 buy this machine 8ith the serice contract i they intent to useit in the on4%run.


2/8

(C)

Computation o the "# $

"#= C/ k%4

n this case C (en6 o year perpetuity payout) = 5,000%1,000= -,000k= 1*+, 6iscount rate4= +, 4ro8in4 rate at perpetuity

"#= ,000 / (0.1*%0.0) = -50,000


!"#= %35,000& 50,000 = -15,000

The rainbo8 pro6ucts company shou6 inest in this proect because its !"# is ar4eypositie because o the reinestment o *0+ o the annua cost, een thou4h this is in aery on4 term ision.

*.

'9':@ Computation o the 22s (8ith nancia cacuator) $

"roect,

%A66 a !e8 Bin6o8 $ 22 = 3.1+%p6ate DEistin4 DFuipment $ 22 = 1G.01+%>ui6 a ne8 stan6 $ 22 = 31.*0+%2ent a ar4er stan6$ 22 = 1*07+

A proects are acceptabe because a the 22s are hi4her than the 6iscount rate(15+)Hookin4 at the interna rate o return o each proect, rent a ar4er stan6

s the proect 8ith the hi4hest 22.

'9':@ Computation o the !"#s (8ith nancia cacuator) $

"roect,

%A66 a !e8 Bin6o8 $ !"# = - *5,1.


3/8

%p6ate DEistin4 DFuipment $ !"# = - *,51.1G%>ui6 a ne8 stan6 $ !"# = - 3,G*5.75%2ent a ar4er stan6$ !"# = - *G,.G7

A the proects are acceptabe because a the !"#s are positie Hookin4 at the netpresent aue o each proect, bui6 a ne8 stan6 s the proect 8ith the hi4hest !"#'9':@ The 6iIerence bet8een the 22 an6 the !"# rankin4 is ma6e by the scaeo the inestments, an inestment o -1,000 here 4ies 8ith an 22 o 1*07+8hich is not enou4h to hae an !"# o the rst proect 8ith an initia inestment oJ-75,000Den thou4h the 22 o the proect number is ar4ey superior to the one o

The rst proect, the rue is to 4o or the proect 8ith the hi4hest !"#. >ut sti 8e cou6

use -1000 or this proect an6 4enerate a net present aue o - *G,.G7 an6 use the6iIerence o -7,000 bet8een the * proects an6 inest it another proect that 4enerateat east - 7,000.

3.

A. n or6er to n6 the subsi6es or this proect 8e rst hae to n6 the amount o yearycash ?o8 8ith the initia inestment o -1,000,000 8ho 8i present an 22 o *5+8ith this ormua.

0= %1,000,000& '' CK/ ( 1 & *5+) i=1

'9':LM'9':LM'9':LM'9':LM

CK= 1,000,000/ *.303

CK= - *,37.5

Nubsi6iOe= *37.5% 37173 ( initia cash ?o8)=-51,35.5

>. in or6er to hae a t8o%year payback perio6 8ith an initia inestment o -1,000,0008e nee6 t8o annua cash ?o8 o -500000.

No, the subsi6iOe= 500000%37173= - 1*G,*1


4/8

C. to compute the annua cash ?o8s or this proect 8e nee6 to soe $

75000= %1,000,000& '' CK/ ( 1 & *0+) i=1

'9':LM'9':LM'9':LM'9':LM

CK= 1075000/ *.5GCK=- 15,0

Nubsi6iOe= 150% 37173= -,170

P. this proect present an A22 o 0+ an6 an initia inestment o -1000000, 8e use

the ormua o the A22 to compute the annua cash ?o8 o this proect.

0.= ( CK '9':;QR (1000000/)) / (1000000/ *)

CK= -50,000

Nubsi6iOe= 50000%37173= -7G,*1

%n or6er to 6etermine 8hich o the our pans 8e be the best to subsi6y 8e compute the"#o the subsi6ies cash ?o8 at the 6iscount rate o *0+, 8e assume that the one 8itho8ersubsi6y is the best or the city.

%Kor the rst pan,

"#= '' 5135.5 / ( 1 & *0+) =1

"#= -13,G.3G

%Kor the secon6 pan,

*"#= '' 1*G*1 / ( 1 & *0+) *i=1


5/8

"#= -1,55.3

%Kor the thir6 pan,

"#= '' 170 / ( 1 & *0+) i=1"#= -11,G.3G

%Kor the ourth pan,

"#= '' 7G*1 / ( 1 & *0+)

i=1"#= -*0*,5.5

Be 8i recommen6 to the city the subsi6ies 8ith the o8est present aue, the one opan number 3.

.

The net present aue o this proect is *10000%110000= -100000

5. Hockhee6 Tri Ntar an6 Capita >u64etin4

At panne6 (*10 units) pro6uction ees, 8hat 8as the true aue o the true aue othe Tri Ntar pro4ramJ

0 1 * 3 5 7 G 10

KiEe6 Costs$ %100 %*00 %*00 %*00 %*00

#ariabe Costs$ %0 %0 %0 %0 %0 %0

2eenues$ 10 10 50 50 50 50 *0 *0

TSTAH$ %100 %*00 %*00 %0 %550 70 70 70 70 %70 *0


6/8

n or6er to compute the !"# in t=0 o the Tri Ntar pro4ram or *10 units you hae to6iscount eery year'9':;


7/8

!"# = *5/1.1 & *5/1.15 & *5/1.1 & *5/1.17 & *5/1.1G & *5/1.1 =*05,10731

"repro6uction costs

Be area6y kno8 rom aboe that the net present aue o prepro6uction costs is733,730G3

!o8, hain4 the 6iscounte6 cash in?o8s an6 out?o8s, 8e can cacuate the net presentaue o the proect 8hen pro6uction is rou4hy 300 units$

!"# = 6iscounte6 reenues '9':;QR 6iscounte6 costs!"# = 17G,G*0 & 71,G77G01 % *05,10731 % 733,730G3!"# = % *7,3G1G*7Be can see that the net present aue o the proect is ne4atie 8hen the ee opro6uction is 300.

This proes that Hockhee6 6i6 not break een in aue terms 8hen the pro6uction ee8as 300.

At 8hat saes oume 6i6 the Tri Ntar pro4ram reach true economic break%eenJ

Bhen the ee o pro6uction is *10, each pane contributes * miion to Hockhee6. Thatis the 6iIerence (=contribution mar4in) bet8een saes price (1 miion) an6 pro6uctioncosts per pane (1 miion). Thereore, 8e can n6 the break%een point 8ith theoo8in4 eFuation$

KiEe6 costs / contribution mar4in = 733,730G3 / * = 3,G'9':LM W 37 panes

n the aboe eFuation, Ee6 costs are the prepro6uction costs that are 6iscounte6 to theen6 o year 17. Be use * miion as contribution mar4in because 8e 6o not kno88hat the pro6uction cost per pane is 4oin4 to be because that 6epen6s on the nayeary output. Be 6o not kno8 that in this case. Thereore, 8e pay sae an6 seect *miion as our contribution mar4in to cacuate the break%een point.

Bas the 6ecision to pursue the Tri Ntar pro4ram a reasonabe oneJ Bhat 8ere theeIects o these proects on Hockhee6'9':;


8/8

Xo8eer, rom the shareho6ers'9':;

lockheed caso

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