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i gave the detail in the question just do the excel for the alternative i will attach if u want the whole powerpoint slides just send a message ( i will try to attach it now if i could ) it’s not that hard.
IE 377 Project: Blueair Inc
Courtney Irwin
Mustafa
Matt Oleksik
Clay
Problem Statement
▶
▶ Work at Blueair Inc
▶
Evaluate Company’s Investment
12%
▶
Alternatives
▶
Choose Alternative with the best
investment
▶
Committee has found investors willing
to invest $10.6 million.
Projects must meet after tax MARR
Use current exchange rate of 1 EURO
= $1.17 U.S Dollars
▶
State tax rate 4%
▶
Federal tax rate 35%
▶
Use MACRS GDS depreciation as
specified
Alternative #1
▶
▶
▶
▶
▶
Invest $5,035,000 for an Enterprise software tool
Implementation and Training costs: $35,000
Revenue: $1.07M. 4% inflation
8 year life
MACRS GDS 7 year property
Alternative #2
Buy 10 new 3D Printers
Buy from German Company for 281,680 Euro’s each
Shipping insurance: $11,000
Installation: $19,000
Training: $30,000
Market Value for all 10 printers: $200,000 in today’s
dollars.
▪ 4% Inflation.
▪ Selling after 8 year life.
▪
▪
▪
▪
▪
▪
Alternative #3
▪ Upgrade current computer controlled machinery
▪ Current machines have 8 year life, purchased 8 years
ago at $3M
▪ Invest $500,000 to extend life 8 years
▪ Savings in labor: $30,000 per year in 1st year dollars. 4%
inflation
▪ Savings in labor/energy costs: $750,000 per year in 1st
year dollars. 4% inflation
▪ Sell old machines for $200,000
▪ MACRS GDS 7 year
▪ Life 8 Years
Alternative #4
▪ Invest $10M to establish manufacturing capability
▪ Net revenue in 1st year: $2M. 4% inflation
▪ Market Value: $1,009,298 in today’s dollars. $% inflation
for * years until sold.
▪ Life 8 Years
▪ MACRS GDS 7 year recovery
Alternative #1 Analysis
EOY
BTCF
DEPR
TI
T(37.6%)
ATCF
PW(12%)
0
($5,070,000)
–
–
–
($5,070,000)
($5,070,000)
1
$1,070,000
$1,014,000
$56,000
($21,056)
$1,048,944
$936,602.10
2
$1,112,800
$1,622,400
($507,600)
$191,609.60
$1,304,409.60
$1,039,875.30
3
$1,157,312
$973,440
$183,872
($69,135.87)
$1,088,176
$774,563.68
4
$1,203,604.50
$584,064
$619,540.50
($232,947.23)
$970,657.30
$616,852.70
5
$1,251,748.70
$584,064
$667,684.70
($251,049.45)
$1,000,699.25
$567,796.75
6
$1,301,818.60
$292,032
$1,009,786.60
($379,679.76)
$922,138.84
$467,155.50
7
$1,353,891.35
–
$1,353,891.35
($509,063.15)
$844,828.20
$382,115.80
8a
$1,408,047
–
$1,408,047
($529,425.67)
$878,621.33
$354,875.15
8b
PW(12%)=
$69,837
Alternative #2A Analysis
Year
BTCF
Depr.
Tax. income
T(40.01%)
ATCF
PW
Acc. PW
0
-$3,710,000
X
X
X
-$3,710,000
-$3,710,000
-$3,710,000
1
$ 1,330,000
$580,174
$
749,826
-$300,005
$1,029,995
$895,683
-$2,814,317
2
$ 1,396,500
$994,294
$
402,206
-$160,923
$1,235,577
$934,220
-$1,880,097
3
$ 1,466,325
$710,094
$
756,231
-$302,568
$1,163,757
$765,170
-$1,114,926
4
$ 1,539,641
$507,094
$ 1,032,547
-$413,122
$1,126,519
$644,144
-$470,783
5
$ 1,616,623
$181,279
$ 1,435,344
-$574,281
$1,042,342
$518,252
$47,470
5
$
X
-$988,924
$395,669
$1,033,809
$514,010
$561,480
Total:
$2,921,999
$561,480
638,141
Alternative #2B Analysis
Year
BTCF
Depr.
0
-$1,500,000
X
1
#
$214,350
2
#
$367,350
3
#
$262,350
4
#
$187,350
5
#
$133,950
6
#
$133,800
Alternative #2B Analysis
(continued)
Year
BTCF
Depr.
0
-$1,000,000
X
Tax. income T(40.01%)
X
X
ATCF
PW
Acc. PW
-$1,000,000 -$1,000,000 -$1,000,000
1
$
300,000
$330,250
$
(30,250)
$12,103
$312,103
$271,405
-$728,595
2
$
315,000
$378,850
$
(63,850)
$25,546
$340,546
$257,487
-$471,108
3
$
330,750
$308,700
$
22,050
-$8,822
$321,928
$211,668
-$259,441
4
$
347,288
$124,900
$
222,388
-$88,977
$258,310
$147,702
-$111,739
5
$
364,652
$44,650
$
320,002 -$128,033
$236,619
$117,647
$5,908
5
$
267,750
X
-$182,085
$85,664
$42,592
$48,501
Total:
$555,171
$48,501
$455,100
Breakeven Analysis
Final Results
Option
Total Investment
Present Worth
1
$5,070,000
$69,837
2
3
4
Possible Investment Combinations
Option
Total Investment
Present Worth
1,2.A,3
$19,060,000
$1,001,938
1,2.B,3
$16,000,000
$488,959
1,2.A
$9,160,000
$926,152
1,2.B
$6,100,000
$413,173
1,3
$15,000,000
$440,459
2.A,3
$13,960,000
$637,266
2.B,3
$10,900,000
$124,287
Final Recommendation
Questions
Alternative #4
Invest $10M to establish manufacturing capability
Net revenue in 1st year: $2M. 4% inflation
Market Value: $1,009,298 in today’s dollars. $% inflation
for * years until sold.
Life 8 Years
MACRS GDS 7 year recovery
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