Corporate Finance: Corning Limited- Altium Ltd- Commonwealth Bank of Australia- Finance Assignment Help

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Finance Assignment Help:

Task: 1. Corning Limited, one of the leading glass producers, is currently evaluating a potential new product; a tough but light curved glass designed for unusually shaped tall buildings and office blocks. The new product would cost more than their usual commercial exterior glasses and in market research conducted by the company’s research department at a cost of $650,000 it was judged superior to various competing products. Monica Andrews, the Chief Financial Officer, must analyse this project, along with other potential investments, and then present her findings to the company’s executive committee. The project will require construction of a new plant that would have an annual capacity of 75,000 tons and will cost an estimated $18,500,000 to build. The estimated purchase cost of machinery is $13,500,000 but shipping costs to move the machinery to the plant would total $425,000 and the estimated installation charge is another $575,000.The land on which the plant will be built has been vacant since it was bought three years ago at a cost of $750,000, which has already been paid and expensed for tax purposes. The company expects its new plant to produce 65,000 tons of glass per year and the management of Corning anticipates they can sell the product at $350 per ton allowing the company to gain 10%market share in the first year of operation. Fixed costs are expected to average $12,500,000 annually while variable costs are estimated to be around $125 per ton. The plant and machinery will be depreciated to zero on a straight-line basis over ten years, with an estimated sale value of $1,000,000 after 10 years at the end of the project. Corning requires 11.5% return on the project. The company tax rate is 30%. Now assume that you are an assistant to Monica and she has asked you to analyse the project and then to present your findings to her. Therefore, a. Calculate the project’s incremental cash flow for each year and present in a tabular form. b. Using the incremental cash flows calculate the project’s: i. Payback Period ii. Net Present Value iii. Profitability Index iv. Discounted Payback Period v. Internal Rate of Return using interpolation method c. Identify and discuss any further information that you may require to help make the accept/reject decision about this project. d. Combining all the information recommend if the project should be undertaken or not and explain your decision to Monica. e. Analyse the importance of capital budgeting for a corporation. Please note if you use a spreadsheet you cannot submit a spreadsheet via EASTS - neither can you submit a spreadsheet as an embedded object in a Word document. If you construct your table in Excel then please simply copy and paste into Word. You can set up your data in a spreadsheet and use it check your answer but remember you still have to show how the NPV, etc. was derived. This does not mean giving the Excel algorithm. It does have to show how the solution was derived. So show how you have discounted the cash flows.