Demonstrate knowledge of a variety of capital budgeting tools including net present value (NPV), internal rate of return (IRR), payback period, and profitability index (PI). The analysis of the capital projects will need to be correctly computed and the resulting decisions rational.

Project B: Expansion into Europe Expansion into Western Europe has a forecast to increase sales/revenues and cost of sales by 10% per year for 5 years. Annual sales for the previous year were $20 million. Start-up costs are projected to be $7 million and an upfront needed investment in net working capital of $1 million. The working capital amount will be recouped at the end of year 5. Because of the higher European tax rate, the marginal corporate tax rate is presumed to be 30%. Being a risky investment, the required rate of return of the project is 12%.