File Home Insert Draw Page Layout Formulas Data Review View Help Share Comments = 99 General Conditional Formatting Insert 29 Arial - 10 10.A A $ % Fomatas Table x Delete Paste Cal Styles # Format Clipboard For Alignment Number 5 Styles Calls Editing Ideas 146 A H UK P F I 23 Capital Budgeting Decisions PRINCIPLES OF FINANCIAL MANAGEMENT FINAL ASSIGNMENT 3 Complete the excel template and submit as an excel file 4 Do your best! 1. Leaming Objectives (a) Develop proforma Project Income Statement Using Excel Spreadsheet (b) Compute Net Project Cash flows, NPV, IRR and PayBack Period 9 $ 200,000 $ (120,000 11) Life Period of the Equipment - 4 years 2) New equipment cost $ 3 3) Equipment ship & install cost $ 4) Related start up coat $ 6) Inventory increase $ 166) Accounts Payable Increase $ 17) Equip. Salvage Value Estimated $ 3 End of Year (fully depreciated) 8) Sales for first year (1) 1200.000) 9) Sales Increase per year 125.000) 10) Operating cost 15.000) (60 Percent of Sales 25,000 11) Depreciation Straight Line)/YR 5.000 12) Tax rate 16.000 13) Cost of Capital (WACCI 60% $ (80,000 35, 10% 21 ESTIMATING Initial Outlay Cash Flow. CFC, TO * YHAR CFO 0 CF1 1 CF2 2 CF4 4 4 Investments: * 1) Equipment cost 2 21 Shipping and install cost >> 3) Startup expenses 2 Total Basis Cosl(123) 41 Net Working Capital Inverliyi. Axt. Payable the II Total Inhalt $ 120.0001 S S S 5 Operations: * Revenue ar Operating Cus! 3 Depreciation 3 CDT Txes 11 Net Income IL OSS) TAX SHIELD DIE IDIOSS A back amciation XXXXXX XXXXX XXXXX XXXXX XXXXX Total Operating Cash Flow xxxxx XXXXX XXXXX XXXXX Terminal END of 4th YEAR 911 AC Wicking Canis S 20.000 File Home Insert Draw Page Layout Formulas Data Review View Help Share Comment 22 General Conditional Formatting Insert Arial -10A 10 A 27 0 $ % Format as Table Delete Ideas Pasta U + -98 Cell Styles Format Clipboard F Font Alignment Number F Styles Cells Editing Ideas J46 f F G + 0 s T XXXXX XXXXX XXXXX 11 Total Operating Cashow 45 Terminal END of 4th YEAR 431) Release of Working Capital 2) Salvage value (allerax) Total S $ s $ 20,000 XX000X 322 Project Net Cash Flows $ $ $ $ $ NPV - Payback- 21 IRR - 25 COST of CAPITAL (WACC) or DISCOUNT RATE OF THE PROJECT= 10% 021 Would you accept the project based on NPV, IRR? Would you accept the project based on Payback rule it project cut-off period is 3 years? 0#2 SENSITIVITY And SCENARIO ANALYIS Capital Budgeting (Investment Decisions 31 (a) Estimale NPV, RR and Payback Period u the project if Marginal Corporate Tax is reduced to 20%. Would you accept or reject the project? Assim Sragiri inalteracion (b) Estimale NPV, RR and Payback period of the project if Cquipsis uly depreciated in first year and tax rate is reduced to 20%. Would you accept or reject the project? (CH Mesa CFO of the firm, which of the above to runaniola) arb would you choose?W? 29 QA3 How would you explain to your CEO what NPV means? 21084 What are advantages and disadvantages of using only Payback method? 1 0#5 What are advantages and disadvantages of using NPV versus IRR? 22 QA6 Explain the difference between independent projects and mutually exclusive projects. When you are contromed win Mutually Exclusive Projects and have collicts with NPV and IRR results, which criterion would you use INPV O IRR) and why? 55 13 . File Home Insert Draw Page Layout Formulas Data Review View Help Share Comments = 99 General Conditional Formatting Insert 29 Arial - 10 10.A A $ % Fomatas Table x Delete Paste Cal Styles # Format Clipboard For Alignment Number 5 Styles Calls Editing Ideas 146 A H UK P F I 23 Capital Budgeting Decisions PRINCIPLES OF FINANCIAL MANAGEMENT FINAL ASSIGNMENT 3 Complete the excel template and submit as an excel file 4 Do your best! 1. Leaming Objectives (a) Develop proforma Project Income Statement Using Excel Spreadsheet (b) Compute Net Project Cash flows, NPV, IRR and PayBack Period 9 $ 200,000 $ (120,000 11) Life Period of the Equipment - 4 years 2) New equipment cost $ 3 3) Equipment ship & install cost $ 4) Related start up coat $ 6) Inventory increase $ 166) Accounts Payable Increase $ 17) Equip. Salvage Value Estimated $ 3 End of Year (fully depreciated) 8) Sales for first year (1) 1200.000) 9) Sales Increase per year 125.000) 10) Operating cost 15.000) (60 Percent of Sales 25,000 11) Depreciation Straight Line)/YR 5.000 12) Tax rate 16.000 13) Cost of Capital (WACCI 60% $ (80,000 35, 10% 21 ESTIMATING Initial Outlay Cash Flow. CFC, TO * YHAR CFO 0 CF1 1 CF2 2 CF4 4 4 Investments: * 1) Equipment cost 2 21 Shipping and install cost >> 3) Startup expenses 2 Total Basis Cosl(123) 41 Net Working Capital Inverliyi. Axt. Payable the II Total Inhalt $ 120.0001 S S S 5 Operations: * Revenue ar Operating Cus! 3 Depreciation 3 CDT Txes 11 Net Income IL OSS) TAX SHIELD DIE IDIOSS A back amciation XXXXXX XXXXX XXXXX XXXXX XXXXX Total Operating Cash Flow xxxxx XXXXX XXXXX XXXXX Terminal END of 4th YEAR 911 AC Wicking Canis S 20.000 File Home Insert Draw Page Layout Formulas Data Review View Help Share Comment 22 General Conditional Formatting Insert Arial -10A 10 A 27 0 $ % Format as Table Delete Ideas Pasta U + -98 Cell Styles Format Clipboard F Font Alignment Number F Styles Cells Editing Ideas J46 f F G + 0 s T XXXXX XXXXX XXXXX 11 Total Operating Cashow 45 Terminal END of 4th YEAR 431) Release of Working Capital 2) Salvage value (allerax) Total S $ s $ 20,000 XX000X 322 Project Net Cash Flows $ $ $ $ $ NPV - Payback- 21 IRR - 25 COST of CAPITAL (WACC) or DISCOUNT RATE OF THE PROJECT= 10% 021 Would you accept the project based on NPV, IRR? Would you accept the project based on Payback rule it project cut-off period is 3 years? 0#2 SENSITIVITY And SCENARIO ANALYIS Capital Budgeting (Investment Decisions 31 (a) Estimale NPV, RR and Payback Period u the project if Marginal Corporate Tax is reduced to 20%. Would you accept or reject the project? Assim Sragiri inalteracion (b) Estimale NPV, RR and Payback period of the project if Cquipsis uly depreciated in first year and tax rate is reduced to 20%. Would you accept or reject the project? (CH Mesa CFO of the firm, which of the above to runaniola) arb would you choose?W? 29 QA3 How would you explain to your CEO what NPV means? 21084 What are advantages and disadvantages of using only Payback method? 1 0#5 What are advantages and disadvantages of using NPV versus IRR? 22 QA6 Explain the difference between independent projects and mutually exclusive projects. When you are contromed win Mutually Exclusive Projects and have collicts with NPV and IRR results, which criterion would you use INPV O IRR) and why? 55 13