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#4 Madison Bakery is considering the installation of a new oven. Made in Milan, the oven would… 1 answer below » #4 Madison Bakery is considering the installation of a new oven. Made in Milan, the oven would enable Madison to produce Old World breads which could be sold at premium prices. Costs are estimated as follows: Milano Oven…$1,150,000 Building Improvements… $650,000 Additions to Working Capital…$100,000 Madison Bakery’s WACC is 7% and its tax rate is 30%. Assume straight-line depreciation, and a five-year life for the oven with no salvage value. EBIT estimates are as follows: $150,000 (Year 1); $175,000 (Year 2); $200,000 (Year 3); $225,000 (Year 4); $250,000 (Year 5). Draw and submit a View complete question » #4 Madison Bakery is considering the installation of a new oven. Made in Milan, the oven would enable Madison to produce Old World breads which could be sold at premium prices. Costs are estimated as follows: Milano Oven…$1,150,000 Building Improvements… $650,000 Additions to Working Capital…$100,000 Madison Bakery’s WACC is 7% and its tax rate is 30%. Assume straight-line depreciation, and a five-year life for the oven with no salvage value. EBIT estimates are as follows: $150,000 (Year 1); $175,000 (Year 2); $200,000 (Year 3); $225,000 (Year 4); $250,000 (Year 5). Draw and submit a time line, including EBIT, taxes, depreciation, operating cash flow, tvm factors, and discounted cash flow. 24. Is the “addition to working capital” a depreciable item ? Why, or why not ? 25. What is the project’s present value ? 26. What is the project’s NPV ? 27. What is the Payback Period, in years, using non-discounted operating cash flows ? 28. Based on your work, should Madison Bakery proceed with this proposed oven ? Briefly cite why, or why not. Attachments: Q.-Attachment….doc View less » Sep 08 2015 01:52 PM
