See question below...NEED BY 2:00pm 5/30
jonecamProposal A: New Factory
A company wants to build a new factory for increased capacity. Using the net present value (NPV) method of capital budgeting, determine the proposal’s appropriateness and economic viability with the following information:
· Building a new factory will increase capacity by 30%.
· The current capacity is $10 million of sales with a 5% profit margin.
· The factory costs $10 million to build.
· The new capacity will meet the company’s needs for 10 years.
· The factory is worth $14 million over 10 years.
****I do not need the entire paper, just the calculations for the paper and short explaination of calculations so that I can explain in the paper. PLEASE do not give me answers below; has already been used, but I do need the same formatting. Thanks!!!!
Year | Cash Flow | PV Factor | Present Value |
0 | (10,000,000) | 1.0000 | (10,000,000) |
1 | 150,000 | 0.9091 | 136,364 |
2 | 150,000 | 0.8264 | 123,967 |
3 | 150,000 | 0.7513 | 112,697 |
4 | 150,000 | 0.6830 | 102,452 |
5 | 150,000 | 0.6209 | 93,138 |
6 | 150,000 | 0.5645 | 84,671 |
7 | 150,000 | 0.5132 | 76,974 |
8 | 150,000 | 0.4665 | 69,976 |
9 | 150,000 | 0.4241 | 63,615 |
10 | 14,150,000 | 0.3855 | 5,455,438 |
Net present value | (3,680,709) | ||
Year | Cash Flow | PV Factor | Present Value |
0 | (10,000,000) | 1.0000 | (10,000,000) |
1 | 150,000 | 0.9434 | 141,509 |
2 | 150,000 | 0.8900 | 133,499 |
3 | 150,000 | 0.8396 | 125,943 |
4 | 150,000 | 0.7921 | 118,814 |
5 | 150,000 | 0.7473 | 112,089 |
6 | 150,000 | 0.7050 | 105,744 |
7 | 150,000 | 0.6651 | 99,759 |
8 | 150,000 | 0.6274 | 94,112 |
9 | 150,000 | 0.5919 | 88,785 |
10 | 14,150,000 | 0.5584 | 7,901,286 |
Net present value | (1,078,460) | ||
In the event of a 12% cost of capital, the NPV has a negative of $4,644,841 which is much lower than the net present value at a weighted cost of capital of 6% and 10%.
Year | Cash Flow | PV Factor | Present Value |
0 | (10,000,000) | 1.0000 | (10,000,000) |
1 | 150,000 | 0.8929 | 133,929 |
2 | 150,000 | 0.7972 | 119,579 |
3 | 150,000 | 0.7118 | 106,767 |
4 | 150,000 | 0.6355 | 95,328 |
5 | 150,000 | 0.5674 | 85,114 |
6 | 150,000 | 0.5066 | 75,995 |
7 | 150,000 | 0.4523 | 67,852 |
8 | 150,000 | 0.4039 | 60,582 |
9 | 150,000 | 0.3606 | 54,092 |
10 | 14,150,000 | 0.3220 | 4,555,921 |
Net present value | (4,644,841) | ||
10 years ago
30
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capital_budgeting.xlsx
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