Week 4 Capital Budgeting Practice problem: � � � � � � � � � � � � � � � � � � � � � � � � � � You have the following data about a proposed project: � � � � � � � � � � � � � � � � � � � � � � � � � � � Cost of new equipment � � $80,000 � � � � � � � � � � � Increase need for Working Capital (to be released at end of project) � � $20,000 � � � � � � � � � � Length of project � 6 � years � � � � � � � Salvage Value of equipment at end of project � � $8,000 � � � � � � � � � � � Annual cash savings if equipment is purchased (cash inflows) � $28,500 � � � � � � � � � � � Tax rate � � 35% � � � � � � � � � � Discount rate required of all investements 14% � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � Required: � � � � � � � � � � � � � 1. What is the annual accounting income? � � � � � � � � � � � � 2. What is the annual after tax cash flow? � � � � � � � � � � � � � 3. What is the payback based upon the initial cash outflows? � � � � � � � � � � � � � � 4. What is the discounted payback based on the initial cash outflows? � � � � � � � � � � � � � 5. What is the simple rate of return based upon the initial cash outflows? � � � � � � � � � � � � 6. What is the net present value? � � � � � � � � � � � � � 7. What is the net present value � � � � � � � � � � � � � 8. What is the internal rate of return � � � � � � � � � � � � 9. Would you recommend this project? Why or why not.
Previous answers to this question
This is a preview of an assignment submitted on our website by a student. If you need help with this question or any assignment help, click on the order button below and get started. We guarantee authentic, quality, 100% plagiarism free work or your money back.
Get The Answer