Assignment, Business Phase 5 Individual Project

FINC615-1303A-01 Applied Managerial FinanceNameInstitutionPhase 5 Individual ProjectDoes the coffee packaging project maximize the firm’s value?Firm value maximization in business is a practice undertaken by the firm that makes the most of a firm’s finances and maximizes profits (Muscarella 2005). In this case, the coffee packaging project does not act to maximize the value of the firm. The firm expects to make sales of $20 million annually. The expected lifespan of the project is five years. This means that the firm projects to make sale to totaling to $60 million within that period. From these sales, we then deduct the expected costs of the project. The initial investment on equipment is $20 million. The tax rates are 35% of the income and add the depreciation on equipment. The gross margin is 50% and all other expenses are 10% of the total sales. When all this cost of production is computed, it costs the firm more than half of its sales. This added to the fact that after the project’s life span equipment will either be dormant or disposed of at a low price. Therefore, the firm does not maximize its value.Should the company undertake this project,