CAPITAL BUDGETING RECOMMENDATION :

The management at a pharmaceutical company is considering new computers and
equipment to manage inventory and to expedite online orders and product
shipment. The investment will be $100 thousand and the cost of capital is 15%.
The company earned $500 thousand in sales last year and anticipates the new
equipment could increase sales by 10% annually. Based on what you have learned
about capital budgeting, would this be a profitable investment over the next
five years?

Assignment

Write a recommendation based on your understanding of capital budgeting.
Include an interpretation of the following?

• What is the discounted payback period?
• Would the investment produce a profit in five years?
• What Modified Internal Rate of Return (IRR) and Internal Rate of Return
  (IRR) should the company expect over the next five years?
• Is the NPV of the project worth the investment?
• What is the profitability index of this project?