Read through the Sharon Pipe Case. Answer the following questions:


 

Read through the Sharon Pipe Case. Answer the following questions:

Q1) What is the decision facing Mr. Todd?

Q2)  The accountant’s estimates in Exhibit 2 use the “most likely” sales projection in Exhibit 1 for each year.  Is this appropriate?

Q3) Fill out the following information in the excel file.

Sharon Pipe, Inc.

Expected Output 

Nominal discount rate

Tax rate

Expected Inflation

CurrentPuchase price   per pound

Distribution Costs          per pound

Purchase price

SV in 8 years

Straight-line depreciation   years

Extra Credit – Construct the cash flows and calculate the NPV when there is no inflation. (Use excel template.)

Note – if you are more comfortable working on pen and paper, print out the excel sheet and submit the homework before class.

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