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Notice that the reason for including the cash flows in Exhibit 6 is explained in detail in the “The Super Project”. In particular, should General Foods include the following or not? Discuss briefly.
a) Test market expenses;
b) Charges for the use of Jell-O agglomerator capacity;
c) Charges for erosion of Jell-O sales;
d) Overhead expenses;
Tip: Read Crosby Sandberg’s analysis in Appendix A carefully, and also the reply in Appendix B. And remember the discussions we had in class about incremental cash flows.
2) Based on your discussion in 1) what are the expected, incremental, after-tax cash flows for the Super Project? Use a tax rate of 52%. Assume the salvage value of the project is equal to the book value of assets, and that NWC is fully recovered at the end of the planning horizon (10 years in this case).
Tip: If you need to estimate another cash flow that is not in Modified-Exhibit#6, use Crosby’s analysis. Or do something else you think is reasonable. There may not be a “right” answer in this case. But your analysis must be internally consistent. And I have to see how you got to the specific cash
a) Test market expenses;
b) Charges for the use of Jell-O agglomerator capacity;
c) Charges for erosion of Jell-O sales;
d) Overhead expenses;
Tip: Read Crosby Sandberg’s analysis in Appendix A carefully, and also the reply in Appendix B. And remember the discussions we had in class about incremental cash flows.
2) Based on your discussion in 1) what are the expected, incremental, after-tax cash flows for the Super Project? Use a tax rate of 52%. Assume the salvage value of the project is equal to the book value of assets, and that NWC is fully recovered at the end of the planning horizon (10 years in this case).
Tip: If you need to estimate another cash flow that is not in Modified-Exhibit#6, use Crosby’s analysis. Or do something else you think is reasonable. There may not be a “right” answer in this case. But your analysis must be internally consistent. And I have to see how you got to the specific cash