ACC Assignment 2 Mid-Term – Texas Roks, Inc.

Assignment 2: Mid-Term Assignment: Accept or Reject the Project?In this assignment, you will undertake calculations in order to evaluate a project, and decide if it should be accepted or rejected.Texas Roks, Inc. is considering a new quarry machine. The costs and revenues associated with the machine have been provided to you for analysis:Cost of the new project$4,000,000Installation costs$100,000Estimated unit sales in year 150,000Estimated unit sales in year 275,000Estimated unit sales in year 340,000Estimated sales price in year 1$150Estimated sales price in year 2$175Estimated sales price in year 3$160Variable cost per unit$120Annual fixed cost$50,000Additional working capital needed$435,000Depreciation method3 years straight-line method, no salvage valueTexas Rok’s tax rate40%Texas Rok’s cost of capital13%Required:Calculate operating cash flow and the change in net working capital.Determine the NPV and IRR of the project.Should the company accept or reject the project based on the NPV? Why?Should the company accept or reject the project based on the IRR? Why?What is your final accept or reject decision? Why?What is the payback period for this project? Would this influence your decision to accept or reject?Deliverables:Submit your findings to the above questions in a Microsoft Word or Excel document to the W3: Assignment 2 Dropbox by Tuesday, January 20, 2015. Use an Excel document to illustrate your calculations.Name your document(s) SU_FIN3030_W3_A2 _LastName_FirstInitial.Assignment 2 Grading CriteriaMaximum PointsCorrectly calculated the operating cash flow and the change in net working capital.50Correctly calculated the NPV50Correctly calculated the IRR.50Correctly calculated the payback period.20Made the correct accept/reject decision and explained why.20Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; displayed accurate spelling, grammar, and punctuation.10Total:200