Jiffy Clean plc is a small organisation that specialises in providing on-site cleaning services to both commercial and residential customers. Jiffy Clean is considering a project that will introduce a new service for a period of five years and then be terminated. The owner of Jiffy Clean, Jason Smith, hired you as the business manager nearly six months ago. In that time, you have proven to be a very valuable employee and Mr. Smith respects your financial knowledge. He has informed you that a marketing research firm has been contracted to conduct a study regarding the feasibility of introducing the new product. The study, which cost £10,000, revealed the following information with regard to expected sales figures:
Year Number of Residential Units (at£25 per unit) Number of Commercial Units (at£50 per unit)
1 2,000 1,500
2 2,500 2,250
3 4,000 2,100
4 3,250 2,000
5 1,750 1,900
Variable cost per unit £10 £25
The new service would require the purchase of new equipment, totalling £220,000, which includes shipping and installation charges. The equipment is to be depreciated on a straight-line basis. Jiffy Clean is expected to have an additional £5,000 of fixed costs per year if the project is undertaken. Mr. Smith also expects that the net working capital will need to be increased by £5,000 now and will be equal to 10% of the monetary value of sales for years 1 through 4, with all working capital being full recovered at the end of the project (working capital will be zero at end of year 5). Jiffy Clean is in the 40% tax bracket.
Mr. Smith believes that he could get a 14% return on his money if it was not placed in this project. He has asked that you analyse the project and provide a recommendation.
Required:
1. Using the financial information presented in the memo above, you need to compute the net incremental cash flows for each period in order to compute an NPV for this project. Note: Round any present value computations to the nearest dollar.
2. Given the lack of knowledge that your boss has regarding capital budgeting decisions, you will need to explain why you used incremental cash flows to analyse the viability of the project as well as how they are computed (i.e., what costs are not included, which costs are included, why they are discounted, etc).
3. Explain the need for the risk analysis regarding the project to your boss. You will need to demonstrate the effect that changes can have on the profitability of the project by re-computing the project analysis to account for a 10% decrease in the sales forecast for commercial sales.
Our Service Charter
-
Excellent Quality / 100% Plagiarism-Free
We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers. -
Free Revisions
We keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed. -
Confidentiality / 100% No Disclosure
We make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service. -
Money Back Guarantee
If the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit. -
24/7 Customer Support
We have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.