Question
can help me solve this? Use Excel to evaluate the following capital budgeting project for the best, base, and worst cases. You will calculate the
can help me solve this?
Use Excel to evaluate the following capital budgeting project for the best, base, and worst cases. You will calculate the following values for each case:
- Net present value
- Internal rate of return
- Profitability Index
- Payback
- Discounted payback
- Average Accounting Return
The cash flows change every year because of the assumptions below.
Note: You must do your calculations in Excel. Do not do them with a calculator and type them in. Example: For the base case, unit sales is 100,000 in year 1. The assumptions state that unit sales will decline in the second year by 1,000. For example, if the year 1 unit sales is in cell B46, year 2 unit sales would be in C46 and the formula in cell C46 would be
-1,000
Here is information about the project.
- Initial Fixed Asset investment= $9,000,000
- Net Working Cap Requirement= $800,000
- Time frame = 5 years
- Marginal tax rate= 35% Discount rate is 12%
- 5-year straight line depreciation with assumption of zero salvage value
- For negative net pre-tax incomes, you must include negative taxes, i.e., if the project loses money, it will reduce the company?s taxable income, thus lowering its tax bill.
Base Worst Best
Unit Sales year 1= 100,000 88,000 112,000
Change in unit sales per year= -1,000 -2,000 0
Price/unit year 1= $200 $180 $220
Change in price per year= -$5 -$10 $0
Variable Cost/unit year 1= $150 $154 $146
Change in variable cost per year= +$1 +$2 $0
Fixed costs year 1= $30,000 $30,000 $30,000
Change in fixed costs per year= $0 +$500 -$500
Actual salvage value= $100,000 $80,000 $120,000
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