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Hi How are you can you do this? If so can you do it asap? Thanks You need to evaluate the following Capital Budgeting proposal:
Hi How are you can you do this? If so can you do it asap?
Thanks
You need to evaluate the following Capital Budgeting proposal: The proposal involves renting space for the venture and requires delivery trucks and other assets. Up Front Issues Building improvements Fleet of Trucks Other Assets Hiring and Training Other Tax-deductible expenses working Capital Capitalize Capitalize Capitalize Expense Expense Depreciation starts in period 1 Projected operating profit (before tax) = Profit will grow for 2 then at 8% for Cost Depreciation (Time 0) Life Class 200.00 15 540.00 7 125.00 3 30.00 Projected Value (End) 0.00 75.00 15.00 15.00 years at 5 a. b. c. d. e. (Improvements are worthless at the end of -50.00 the -project, but you will need to restore the building - Restoration expenses are taxdeductible) 120.00 18% (to give you profit in years 2 and 3) years, then at 4% for the remainder. Tax rate 28.0% Projected life 10.00 years Cost of Capital 9.50% For Terminal Value, assume you will shut down operations and take the cash. 1. MACRS Depreciation Table Compute the NPV IRR MIRR Payback Discounted Payback Year 1 2 3 3 33.33% 44.45% 14.81% 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 7.41% MACRS Table Life Class 5 7 10 20.00% 14.29% 10.00% 32.00% 24.49% 18.00% 19.20% 17.49% 14.40% 11.52% 11.52% 5.76% 12.49% 8.93% 8.92% 8.93% 4.46% 11.52% 9.22% 7.37% 6.55% 6.55% 6.56% 6.55% 3.28% 100.00% 100.00% 100.00% 100.00% 2. a. b. Make 2 Data Tables Evaluate the NPV as a function of the cost of capital Evaluate the MIRR as a function of the cost of Building Improvements 3. Graph those tables 4. Do a Scenario Analysis with the following Scenarios: a. Base Case (as above) b. Optimistic Case Building improvements: Fleet of Trucks Other Assets Initial Profit grows at b. Pessimistic Case Building improvements: 25% Projected Value (End) -25.00 100.00 30.00 for the first two years Projected Value (End) -75.00 Fleet of Trucks Other Assets Initial Profit grows at 10% 50.00 0.00 for the first two years 15 5.00% 9.50% 8.55% 7.70% 6.93% 6.23% 5.90% 5.90% 5.91% 5.90% 5.91% 5.90% 5.91% 5.90% 5.91% 2.95% 20 3.750% 7.219% 6.677% 6.177% 5.713% 5.285% 4.888% 4.522% 4.462% 4.461% 4.462% 4.461% 4.462% 4.461% 4.462% 4.461% 4.462% 4.461% 4.462% 4.461% 2.231% 100.00% 100.00% Capital Rationing Suppose you are in the Corporate Trasurers office and you need to help decide Which projects will be chosen for the upconing year. You have the following information: 1 2 3 4 5 6 7 8 9 10 Project Name Brazil 1 Brazil 2 Panama South Africa Kuwait India 1 India 2 Vietnam South Korea Lithuania Totals Division Americas Americas Americas Af/MidEst Af/MidEst Asia Asia Asia Asia Europe Cost $1,035.67 $1,877.41 $2,572.91 $640.15 $533.23 $782.74 $2,083.32 $1,330.08 $1,435.51 $1,000.07 NPV $1,254.00 $2,524.00 $8,325.00 $825.00 $528.00 $987.00 $1,158.00 $1,648.00 $1,154.00 $951.00 IRR 12.900% 5.900% 7.200% 11.900% 10.300% 5.800% 8.800% 6.100% 14.500% 12.000% 1. If the Capital Budget is 2. Repeat the above if y ou can only take a maximum of 1 project from each Division. Choose 1 1 1 1 1 1 1 1 1 1 $10,000.00 the compute the optimal set of projects. 3 2 4 1Step by Step Solution
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