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CAPITAL BUDGETING DECISION MAKING DATA Cost of Project = $180.00 m Life of Project = 7 yrs Use Stratight Line Depreciation to Book Value of
CAPITAL BUDGETING DECISION MAKING DATA | |||||
Cost of Project = | $180.00 | m | |||
Life of Project = | 7 | yrs | |||
Use Stratight Line Depreciation to Book Value of ZERO. |
This Project requires building a Mfg Plant in Ghana. | ||||||
Plant will produce Bi-Cyle Parts. | ||||||
In addition to Cost of Project, it is estimated that | ||||||
ST Investment of $ 35m will be required, 90% of this | ||||||
investment would be recoverable at the termination of | ||||||
the Project. | ||||||
Salvage Value of Plant at end of 7th yr = | $75.00 | m |
IMPACT OF THE PLANT | |||||||
1 | Revenue in the First year will be = | $50.00 | m | ||||
2 | Estimated Reve growth per yr = | 10% | |||||
3 | 1st yr expenses = | $20.00 | m | ||||
4 | Estimated growth in Expenses per yr= | 8% | |||||
COMPANY POLICY | |||||||
1 | Use a Discount Rate of: | 10% | |||||
2 | The Company is in 21% Marginal Tax Bracket (MTB) | ||||||
Questions: | |||||||
1 | First develop a Time-Line Digram and then calculate all of the | ||||||
CAPITAL BUDGETING Criteria. | |||||||
2 | Shoud this Project be accepted or not? | ||||||
Give your reasons based on the Capital Budgeting Criteria. |
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