Capital Budgeting

ch10_icp_student_go-by-1.xlsx

Sheet1

Name
FIN504 Financial Management												Tax Rate
Date												Growth Rate - Revenues
	Ch 10 Integrative Case Problem: Capital Budgeting											Growth Rate - Costs
Information on New Equipment
Cost of New Equipment												Year 1 demand for service =
Plus: Delivery and Installation												Price
Plus: Immediate Net Working Capital Required for Asset												Year 1 units demanded
Net Investment
												Revenues
												Project Year
												Annual Sales Demand
Net Cash Flow Calculation	0	1	2	3	4	5	6	7	8	9	10	Total Cash Inflows
Cash Inflows:												Costs
Cash Outflows (net savings):												Project Year
Depreciation:												Cost Savings
Incremental Earnings Before Taxes												Operating, Maintenance, & Insurance
Taxes												Additional Computer Operating Costs
Additional Net Working Capital												Total Cash Outflows (net savings)
After-tax Recapture of Asset Salvage Value
Recapture of Working Capital
Net Cash Flow												MACRS Table
												Recovery Year	3	5	7	10	15	20
												1	33.33%	20.00%		10.00%	5.00%	3.750%
												2	44.45%	32.00%		18.00%	9.50%	7.219%
Summary Information												3	14.81%	19.20%		14.40%	8.55%	6.677%
After-tax cost of capital												4	7.41%	11.52%		11.52%	7.70%	6.177%
Net Present Value		REJECT										5		11.52%		9.22%	6.93%	5.713%
Internal Rate of Return		REJECT										6		5.76%		7.37%	6.23%	5.285%
												7				6.55%	5.90%	4.888%
Explanation of answers and resulting recommendation:												8				6.55%	5.90%	4.522%
												9				6.56%	5.91%	4.462%
												10				6.55%	5.90%	4.461%
												11				3.28%	5.91%	4.462%
												12					5.90%	4.461%
												13					5.91%	4.462%
												14					5.90%	4.461%
												15					5.91%	4.462%
												16					2.95%	4.461%
												17						4.462%
												18						4.461%
												19						4.462%
												20						4.461%
												21						2.231%
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