The Capital Budgeting Process

1. Which of the following should be included in the capital budgeting process? Choose ALL that apply

A. Compute depreciation using different methods to include in the analysis

B. Include taxes & financing requirements

C. Perform a post audit after the asset is in place or the project is finished

D. Estimate sunk costs & add them to the valuation

E. Evaluate the riskiness of the project cash flows

Net Present Value Method

Ewing Mfg. is evaluating a proposed capital budgeting project that will require an initial investment of $144K. The project is expected to generate the following net cash flows

Year 1	$41,200
Year 2	$51,100
Year 3	$46,800
Year 4	$44,900

2. Assume the desired rate of return on this project is 9%. What is the net present value of this project?

A. $10,285.40

B. $4,754.50

C. $15,498.90

D. $-23,773.90

3. Suppose Ewing Mfg. has enough capital to fund the project & its not competing for funding with other projects. Should Ewing Mfg. accept or reject this project?

A. Accept

B. Reject