GET ASSIGNMENT WRITING HELP, Online Writing Service: You have been selected by the CFO of Ying & Jones, Inc. to perform a financial analysis for an upcoming project.

Saturday, January 21, 2017

You have been selected by the CFO of Ying & Jones, Inc. to perform a financial analysis for an upcoming project.

You have been selected by the CFO of Ying & Jones, Inc. to perform a financial analysis for an upcoming project. The project is for the design and build of a chemical plant in Arizona. The CFO needs to have the results of the analysis by next Wednesday, march 19th. Upon your initial review you have studied the balance sheet of Ying & Jones. You have the following information. Total Assets= $21,000,000 Total Liabilities equal $8,500,000, Preferred Stock = $2,500,000, and equity capital (common Stock, additional paid in capital, and retained earnings are 10,000,000 The project consist of a buildout of a chemical production factory, It is estimated that the capital outlay for the project ( the money spent to buy the fixed assets , will be 16,000,000. In addition, management has recommended a seven year depreciation for the equipment. It will take 2 years before any revenue will be available from the plant. At the conclusion of year 3, the company expects 5,000,000 for the first year and a fifteen percent growth rate for the next eight years. Management expects to pay 800,000 in interest based on the loan of $16,000,000. Taxes will be 30 percent of current or forecasted income. In addition there will be an initial working capital requirement that will require $50,000 upfront and it must maintain a working capital relation of 3% of current or forecasted sales. Working capital will be recovered at the end of the period. At the end of the period, the company will sell the plant at an estimated price of $4,000,000 . Additional information you have determined is as follows: Price of Preferred Stock is $45/ shr Price of Common Stock is $65/shr The beta of the stock is 1.25 There are 20 years remaining on the bonds listed on the balance sheet The dividend for the preferred stock is 3.00 per share Interest rate on 20 year federal bonds is 2.90% There is no dividend on the common stock. However upon, further review you determine that the current price of the bonds (1000 principle per bond) is 1090. The market return during the first quarter of the year is 11%. The tax rate the company uses in its computation is 30% as listed above. Using the weighted average cost of capital as the appropriate discount rate, please analyze the project and determine if the project should go forward.