Question
Based on the inputs below prepare a capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return, Profitability Index
Based on the inputs below prepare a capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return, Profitability Index and Payback in years methods, determining whether the project is feasible. Please show your spreadsheet calculations and your final determinations of "go" or "no go" on the project. Use your Investment Return Analysis as an example for this capital budget analysis.
WACC - Debt is 70% and Equity is 30% of this firm's capital structure. Interest rate on the debt is 7.5%, firm's tax rate is 22%. Firm's beta is 1.50, Risk Free Rate is 1.0%, Market Return Rate is 7.0%. Project Investment Outlay, Year 0 - $1,000,000 Project Investment Life - 10 years Project Depreciation - $100,000 / year Project Salvage Value - $30,000 Working Capital Base of Annual Sales - 10% Expected inflation rate per year - 3.0% Project Tax Rate - 30% Units sold per year - 40,000 Selling Price per Unit, Year 1 - $40.00 Fixed operating costs per year excluding depreciation - $175,000 Manufacturing (Variable) costs per unit, Year 1 - $30.00
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