T. Question A - Capital Budgeting(15 marks) The capital budgeting analysis was completed by a company Chief Financial Officer (CFO) for the following project. Answer the questions below. YO Yr.1 Yr. 2 Yr. 3 Yr.4 Yr. 5 Cumulative Income Statement Sales Cost of Goods Sold Gross Profit Fixed Expenses (excluded Depreciation Depreciation Eamings Before Interest and Taxes (EBIT) Tas Net Income 550.000 (165,000) 385.000 (165,000) (100,000) 120,000 (30,000) 90,000 516,670 155,001) 361,569 (155,001) (100,000) 106,668 (26,668) 80,000 350,000 (105.000) 245,000 (105.000) (100.000) 40.000 (10,000) 30.000 300,000 (90,000) 210,000 190,000) (200,000) 20,000 (5,000) 15,000 250,000 175.000) 175.000 175.000) (200,000) 286,668 215,000 Cash Flows ELIT Add Depreciation Subtract Taxes Operating Cash Flow 120,000 100.000 (30,000) 190,000 100,000 106,658 100.000 (28.668) 280.000 40.000 100,000 (10,000) 130,000 20,000 100,000 (5,000) 115.000 100.000 Assets Purchase Proposed investment in Equipment investment in inntones Residual value of equipment after Tax Total Cash Flows (500,000 (2000) 1520,000) 20,000 50.000 170.000 190.000 180.000 130.000 115.000 Du count Factor at Present Values 1.000 1520.000 0.909 172,710 148.680 0.751 97.630 0.683 78.545 0.621 105.370 Questions - Calculate or answer the following: 1. Accounting average return? 2. Payback period? 3. Net present value