D m F G H K 4 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 A B 1 CAPITAL BUDGETING EXAMPLE 2 3 Initial Investment $79,000 Machine Life 9 5 Annual Savings $17,300 6 Salvage Value $0 7 Cost of Capital: 8.00% 8 Year 10 # Period 0 11 1 Initial Cost 12 13 2 Savings 14 3 Salvage 15 4 Total cashflow $79,000 16 17 5 Factor 18 19 6 PV of #4 20 21 7 Accu. PV 22 23 24 9 NPV 25 26 10 IRR(C15:M15) 27 17300 17300 17300 17300 17300 17300 17300 17300 17300 $17,300 $17,300 $17,300 $17,300 $17,300 $17,300 $17,300 $17,300 $17,300 0.9259 0.8573 0.7938 0.7350 0.6806 0.6302 0.5835 0.5403 0.5002 $16,019 $14,832 $13,733 $12.716 $11,774 $10,902 $10,094 $9,347 $8,654 $108,071 ORANSSON "at 8% "at 20% Sheet Sheet2 Sheets +