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CAPITAL BUDGETING ANALYSIS CASH FLOWS OVER THE PROJECT'S LIFE Net Cash Flows At End of Year Year Number 0 1 2 3 4 YEAR 2016
CAPITAL BUDGETING ANALYSIS
| CASH FLOWS OVER THE PROJECT'S LIFE | ||||||
| Net Cash Flows At End of Year | ||||||
| Year Number | 0 | 1 | 2 | 3 | 4 | |
| YEAR | 2016 | 2017 | 2018 | 2019 | 2020 | |
| CAPITAL PROJECT 1 | -$2,255,000 | $721,400 | $801,800 | $593,100 | $1,136,000 | |
| CAPITAL PROJECT 2 | -$3,265,964 | $926,208 | $927,125 | $821,196 | $2,139,306 | |
| CAPITAL PROJECT 3 | -$1,743,541 | $338,026 | $438,825 | $707,028 | $1,213,703 | |
| CAPITAL PROJECT 4 | -$3,567,558 | $804,269 | $919,913 | $1,335,775 | $1,958,653 | |
| Target Rate of Return | 14.375% | |||||
| CAPITAL BUDGETING CALCULATIONS & EVALUATION | ||||||
| Project Evaluations | ||||||
| Calculate | Net Present Value (NPV) | Internal Rate of Return (IRR) | Profitability Index (PI) | Payback Period | Discounted Payback Period | |
| CAPITAL PROJECT 1 | $0 | 0.0% | 0.000 | 0.00 | 0.00 | |
| CAPITAL PROJECT 2 | $0 | 0.0% | 0.000 | 0.00 | 0.00 | |
| CAPITAL PROJECT 3 | $0 | 0.0% | 0.000 | 0.00 | 0.00 | |
| CAPITAL PROJECT 4 | $0 | 0.0% | 0.000 | 0.00 | 0.00 | |
| a) Identify all project combinations that are acceptable for Amaron Products based on the NPV acceptance criterion. | |||||||
| POSSIBLE PROJECT COMBINATIONS examples: (#5 & #7 & #8) or (#5 & #7) | Combined Project Cash Flows At End of Year | ||||||
| Project Cost 2016 | 2017 | 2018 | 2019 | 2020 | NET PRESENT VALUE (NPV) | ||
| ? | ? | ? | ? | ? | ? | ? | |
| ? | ? | ? | ? | ? | ? | ? | |
| ? | ? | ? | ? | ? | ? | ? | |
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| b) From the list of Acceptable Project Combinations you identified in part (a) above select the project combinations that have a combined project cost less than the Restricted Capital Budget of $5,235,700. | |||||||
| POSSIBLE PROJECT COMBINATIONS examples: (#5 & #7 & #8) or (#5 & #7) | Combined Project Cash Flows At End of Year | ||||||
| Project Cost 2016 | 2017 | 2018 | 2019 | 2020 | NET PRESENT VALUE (NPV) | ||
| ? | ? | ? | ? | ? | ? | ? | |
| ? | ? | ? | ? | ? | ? | ? | |
| ? | ? | ? | ? | ? | ? | ? | |
| c) Which ONE of these project combinations identified in part (b) above will MAXIMIZE the corporate value of Amaron Products? | |||||||
| PROJECT COMBINATION THAT WILL MAXIMIZE THE CORPORATE OF AMARAON PRODUCTS. | Combined Project Cash Flows At End of Year | ||||||
| Project Cost 2016 | 2017 | 2018 | 2019 | 2020 | NET PRESENT VALUE (NPV) | ||
| ? | ? | ? | ? | ? | ? | ? | |
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