CAPITAL BUDGETING- Supreme Shoe Company

1 A) Create Operating Cashflow Statement for the new project to calculate the after-tax cash flows year-by-year.

B) Determine the payback period, discounted payback period, NPV, PI, IRR & MIRR.

C) Create an NPV profile chart for the project.

Alignment AutoSave Off P23 Old t Price Original Life Driginal Salvage Value 40,000 75,000 35,000) 6,000 16.000) MACRS Salvage Value 22.000 15.000 Book Value Taxable A Shipping and Install 20 000 81000 8 15,000 (15,000) 0 22.000 61,000) 3,000(3.0000 23.000 5,000 1000 Curment Salvage Value Curren Book Val" Increase in Raw Materials Mainten ance Margnal Tax Rate 29,000 6,000 4,000 H Defects 2000 3400% 2,000 Reg-ed Retun (32,000) (32000) (32,000) Change in Expenses 4.000 14.000000) 14,000) (4,000) Change in Depreciation Change in EBIT 26 Add Back Change in Depreciation 27 Opersting Cash Flow After Taw change nlkr-0peraing Cash Flo, 9 Toal Alter-Tax CashFlows 6 62.680 162 680) Choose Depreciation Method 2 MACRS Class 4 Depreciation Schedules 5 Old Machine Saight-Line 6 New Machine Saighe-Line 4,000 4,000 4,000 4,000 4,000 13 200 13.200 13,200 13,200 13.200 New Machine: MACRS 40 Profitablity Measures 41 Payback Period 42 Discounted Payback 43 Net Present Value(NPV 45 Internal Rate of RetunIFRI ( ) a l problem, 2) Chapter 12 chapter13 | Chapter 11 | Alignment AutoSave Off P23 Old t Price Original Life Driginal Salvage Value 40,000 75,000 35,000) 6,000 16.000) MACRS Salvage Value 22.000 15.000 Book Value Taxable A Shipping and Install 20 000 81000 8 15,000 (15,000) 0 22.000 61,000) 3,000(3.0000 23.000 5,000 1000 Curment Salvage Value Curren Book Val" Increase in Raw Materials Mainten ance Margnal Tax Rate 29,000 6,000 4,000 H Defects 2000 3400% 2,000 Reg-ed Retun (32,000) (32000) (32,000) Change in Expenses 4.000 14.000000) 14,000) (4,000) Change in Depreciation Change in EBIT 26 Add Back Change in Depreciation 27 Opersting Cash Flow After Taw change nlkr-0peraing Cash Flo, 9 Toal Alter-Tax CashFlows 6 62.680 162 680) Choose Depreciation Method 2 MACRS Class 4 Depreciation Schedules 5 Old Machine Saight-Line 6 New Machine Saighe-Line 4,000 4,000 4,000 4,000 4,000 13 200 13.200 13,200 13,200 13.200 New Machine: MACRS 40 Profitablity Measures 41 Payback Period 42 Discounted Payback 43 Net Present Value(NPV 45 Internal Rate of RetunIFRI ( ) a l problem, 2) Chapter 12 chapter13 | Chapter 11 |