AH Layout Tables Charts Farma Data 10 A A BIU SAE w Ceny Paste C. JAD ve Land Capital Budgeting Decisions Exercise (1) EING 7319 - FALL 2020 Learning Objectives Instructor Dr. Lou 20 1. Understand how to use Excel spreadsheet (a) Develop proforma Project Income Statement Using Excel Spreadshoot (b) Compute Net Project Cash flows, NPV, IRR and PayBack Period c) Develop Problem Solving and Critical Thinking Skils 10 11) Life Period of the Equipment 4 years 12 2 New equipment cost 7) Sales increase per year $ 5% (200,000) & Operating cost 133) Equipment ship & Install cost $ (120,000) (35,000) 100 Percent of Sales) Related start up cost 40% $ (5.000) 9 Depreciation (Straight Line/YR $ 255) Equip. Salvage Value (60,000) $ 15,000 10 Corporate Marginal Tax Rate 36 ) Sales for first year (1) 21% $ 17 200,000 11) Cost of Capital (WACC) 10% 1 ESTIMATING Initial Olay Cash Flow, CFC, Te 19 20 CFO CF1 ch CF2 CF3 CF4 2 3 22 Investments 4 21) Equipment Cont 242 Shipping and Install cost 25 3) Start up expenses Total Basis Cost (123) 1240.000) Total Initial Outly $ 249.000 30 Operations Revenue 200.000 210,000 $220,000 231,525 Operating cost $ (120,000) (126,000) S (132.300) 5 (138.915 33 Depreciation 150.000 EBIT $ 20.000 $ 200 Net Income $ 15.000 Add back Depreciation $ 80,000 Total Operating Cash Flow S 75 800 41 Terminat 1) Sage value (her Salvage Value Before Tex (IT) 11.000 To 11,850 Project Mat Cash Flows 240.000 25,000 s NPV 32.00 -235 Paytracks 2 001 Would you accept the project based on NPV, RR? 15 Would you see the project besed on Payticke project cut-off 3 years 12 How would you explain to your CEO wa NPV mean? on What are advantages and advantage of using only Payback method w What are advantages and disadvantage of wing NPV SUSIR? 16 Gs Explain the difference between independent projects and mutually live projects When you are corronted with My Prots and have fiets wth which you and why? 45