DESTROYA PEST CONTROL, INC.
Desmond Troya, CEO of DESTROYA Pest Control, Inc. is weighing the purchase of new equipment, based on heat sensing technology, for termite inspections. The equipment will cost $156,000 including delivery and setup. It is expected to have a useful life of 5 years and will be depreciated using the MACRS percentages for a seven-year class life. After five years, the estimated disposal value of the equipment would be $15,600.
Adoption of the new inspection technology would require an investment in Net Working Capital equal to 15% of the following year’s revenue from inspection services. For purposes of analysis, Mr. Troya assumes that this investment will occur at the beginning of each year (at t0 for yr 1, t1 for year 2, etc.). Falling sales would result in a positive cash flow from the partial liquidation of working capital. All net working capital will be recovered at the end of the project (year 5). DESTROYA estimates its average cost of capital (discount rate) at 10.5% and its marginal tax rate at 34%.
Most likely scenario:
Mr. Troya believes the equipment would be used to perform 960 inspections the first year. Customers would be charged $150 for an inspection. Labor, supplies and other direct, cash costs per inspection would be $75. DESTROYA would also have $20,000 per year in fixed costs directly associated with this project. Fixed costs would stay the same throughout the five years. Troya believes that the number of inspections would probably increase by 5% per year; the price of an inspection and direct, variable costs would also increase by 5% per year.
Best case scenario:
Same as the most likely scenario except that 1050 inspections are performed in the first year and the number of inspections performed increases at the rate of 10% per year for the remaining four years.
Worst case scenario:
960 inspections are performed in the first year, but competitors purchase the same technology causing unit sales and price to fall by 5% per year. Direct variable costs, on the other hand, still rise at the rate of 5% per year.
1. Compute a separate schedule of cash flows (investment, operating and terminal, if any) for each scenario of the expansion project.
2. For each scenario, compute payback, net present value, and internal rate of return.
3. Make a recommendation whether or not to go ahead with the project. Consider all three scenarios. You have subjectively estimated the probability of the best and worst case scenarios at 25% and 50% for most likely case. Explain your decision. Keep in mind that scenarios happen, they cannot be chosen in advance.
Why Choose Us
We value our clients. For this reason, we ensure that each paper is written carefully as per the instructions provided by the client. Our editing team also checks all the papers to ensure that they have been completed as per the expectations.
Professional Academic Writers
Over the years, MyEssay.Help has managed to secure the most qualified, reliable and experienced team of writers. The company has also ensured continued training and development of the team members to ensure that it keep up with the rising Academic Trends.
Our prices are fairly priced in such a way that ensures affordability. Additionally, you can get a free price quotation by clicking on the "Place Order" button.
We pay strict attention on deadlines. For this reason, we ensure that all papers are submitted earlier, even before the deadline indicated by the customer. For this reason, the client can go through the work and review everything.
At MyEssay.help, all papers are plagiarism-free as they are written from scratch. We have taken strict measures to ensure that there is no similarity on all papers and that citations are included as per the standards set.
Customer Support 24/7
Our support team is readily available to provide any guidance/help on our platform at any time of the day/night. Feel free to contact us via the Chat window or support email: email@example.com.
Try it now!
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.
MyEssay.help has stood as the world’s leading custom essay writing services providers. Once you enter all the details in the order form under the place order button, the rest is up to us.
At MyEssay.help, we prioritize on all aspects that bring about a good grade such as impeccable grammar, proper structure, zero-plagiarism and conformance to guidelines. Our experienced team of writers will help you completed your essays and other assignments.
Admission and Business Papers
Be assured that you’ll definitely get accepted to the Master’s level program at any university once you enter all the details in the order form. We won’t leave you here; we will also help you secure a good position in your aspired workplace by creating an outstanding resume or portfolio once you place an order.
Editing and Proofreading
Our skilled editing and writing team will help you restructure you paper, paraphrase, correct grammar and replace plagiarized sections on your paper just on time. The service is geared toward eliminating any mistakes and rather enhancing better quality.
We have writers in almost all fields including the most technical fields. You don’t have to worry about the complexity of your paper. Simply enter as much details as possible in the place order section.