Budgeting

Polite Chimney Limited
Polite Chimney Ltd (PCL) is a leading manufacturer of items used in kitchens such as gas stoves, electric chimneys, ovens and so on. It has grown significantly under the CEO Akbar Ahmed’s dynamic leadership. In line with his belief to enhance competitiveness by using research and development for launching innovative products in the market, the PCL has recently developed a Zero Maintenance Electric Chimney (known as ZMEC) which is ideally suited for Pakistan cooking. The research and development cost of ZMEC amounts to Rs 2,000,000.
To gauge the market prospects for ZMEC, a market survey was conducted by Bazar Jinni Pvt. Ltd. The results of the survey were very positive showing a significant demand for ZMEC. The survey report also indicated that ZMEC could capture 8% of the current market share and would be able to sell following number of units of gas electric chimney:
Year
Units
1
10,000
2
10,300
3
10,609
4
10,927
5
11,255
Considering the growth of satellite towns/cities and residential colonies, the sale is expected to grow at 3% annually. The VP, Marketing suggested to the CEO that a market penetration pricing strategy would be most suitable and ZMEC should be priced at Rs. 3,100 per unit. The marketing and administrative costs (fixed cost) are expected to increase by Rs. 400,000 per year.
The PCL is presently using 6 machines acquired 3 years ago at a cost of Rs. 8,000,000 each, having a useful life of 8 years, with no salvage value. These machines are currently being used for manufacturing other types of chimneys. They could be sold for Rs. 2,600,000 per machine.
The machine to manufacture ZMEC is available in that market for Rs. 70,000,000 with a useful life of 5 years and salvage value of Rs. 1,000,000. It can produce other types of chimneys also. The new machine’s installation cost will be 1,500,000 and being having state of the art technology would improve the productivity of the workers as well change the unit variable cost of manufacture to Rs. 600. PCL corporate tax rate is 35% and uses straight line method to calculate depreciation on all machines.
The maintenance costs currently amount to Rs. 100,000 per year (existing machine). They would total Rs. 170,000 with the new machine. The net working capital required to start production of ZMEC would be Rs. 1,000,000.
Required:
1. Calculate initial investment outlay.
2. What will be the operating cash flows over the life of the project?
3. Estimate terminal cash flows and terminal year cash flows separately.
4. Determine whether project should be accepted or not using NPV and PI criteria. Explain your answer briefly (Use WACC calculated in Case I: Fatimah Enterprises).
5. Explain briefly why financing costs are ignored at the time of cash flow calculation for capital budgeting project? Give example.

Don't use plagiarized sources. Get Your Custom Essay on
Budgeting
Just from $13/Page
Order Essay
The Quizlet
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Us

Exemplary Academic Writing Service

At TheQuizlet.com, you are guaranteed of quality service from our professional writers. We maintain consistent communication with customers after placing an order to avoid missing anything that may compromise the quality of delivered work.

Top Writers

Our hiring process is rigorous to maintain the desired quality that has become the core of our business. We expose potential writers to an uncompromising selection process that enables TheQuizlet to pick the best out of the rest. TheQuizlet boasts of a competent team of writers, editors, and professors who work towards accomplishing your goals.

Plagiarism-Free Papers

TheQuizlet has an in-house plagiarism software that lowers the probability of delivering plagiarized papers to our clients. Referencing is guided by the format specified by a customer when placing an order. Our writers are conversant with all referencing formats that include APA, MLA, Chicago, Harvard, and Vancouver among others.

24/7 Customer Support

We understand the importance of effective communication and as such, TheQuizlet has a dedicated customer support department that responds to all client needs. You can easily contact our team through a chat window at the bottom left corner. Additionally, clients can reach us through support’s email or a telephone number available on our contact page. Feel free to contact us at any time and our team of experts will solve all your problems.

Swift Delivery and 100% Money-back Guarantee

When placing an order, ensure that you specify the correct deadline to help our writers work around the provided timeline. At TheQuizlet, we deliver our tasks before the projected deadline to give time for the customer to proofread the work before submission. In the event we cannot deliver a paper on time, we initiate contact with the client to renegotiate a new deadline.

Unlimited and Free Revisions

We urge all our customers to request for a revision whenever they identify a need to amend the paper. Since we understand your concerns, TheQuizlet.com does not charge for revisions. Nonetheless, we encourage customers to be genuine when requesting for revisions.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

TheQuizlet is a one-stop shop for all your writing needs. We tackle each customer’s needs differently to improve the quality of outcomes and meet your expectations.

Essays

Academic Help Service

TheQuizlet is committed to delivering quality work on time to ensure our clients get the value for their money.

Admissions

Admission Essays and Professional Writing

Admission essays are personal, as opposed to other papers. For this reason, our team will request for any information that will enable them to deliver quality work, which allows you to convince the admissions board on why you should be granted the application.

Reviews

Editing and Proofreading

Our team comprises of qualified researchers, writers, and editors who go through the different papers before delivering them to our clients. Whether your paper is being written from scratch or you want it to be edited, you can trust TheQuizlet for all your needs.

Reviews

Revision Support

After receiving the final draft, you can request for a revision to incorporate various changes that are aligned with your expectations. All our papers are written in line with the latest writing standards.