use net capital spending 650000
sales change % per year 1.00%
create two work sheets one for 35% tax rate and 20% tax rate
if u need help lmk
Please finish the capital budgeting project. Write your name and class and section (1NTB) and year(2020) (1 pt of grade) on the TOP of your excel sheet. You MUST create two worksheets one is under the 35% Tax rate (one point of grade) and the 20% tax rate (one point of grade). First Name Net capital sepnding Bianca Ekaterina Alison Joyce Amirbek Sales change% per year 250000 0.00% 350000 1.00% 450000 1.00% 550000 1.00% 650000 1.00% Capital Budgeting Decisions PRINCIPLES OF FINANCIAL MANAGEMENT GROUP PROJECT (FINC 3310) INSTRUCTOR: 1. Learning Objectives (a) Develop proforma Project Income Statement Using Excel Spreadsheet (b) Compute Net Project Cash flows, NPV, IRR and PayBack Period (c) Develop Problem-solving and Critical Thinking Skills 200,000 5% -120,000 1) Life Period of the Equipment = 4 years 2) New equipment cost 3) Equipment ship & install cost 4) Related start up cost 5) Inventory increase 6) Accounts Payable increase 7) Equip. Salvage Value Estimated End of Year 4 (fully depreciated) 8) Sales for first year (1) -200,000 9) Sales increase per year -35,000 10) Operating cost: -5,000 (60 Percent of Sales) -60% 25,000 11) Depreciation (Straight Line)/YR 5,000 12) Tax rate 15,000 13) Cost of Capital (WACC) -60,000 35% 10% ESTIMATING Initial Outlay (Cash Flow, CFO, T=0) YEAR CFO 0 CF1 1 CF2 2 CF3 3 CF4 4 Investments: 1) Equipment cost 2) Shipping and Install cost 3) Start up expenses Total Basis Cost (1+2+3) 4) Net Working Capital Inventory Inc.- Acct. Payable Inc. -20,000 0 0 0 0 Total Initial Outlay Operations: Revenue Operating cost Depreciation EBIT Taxes Net Income (LOSS) TAX SHIELD DUE TO LOSS Add back Depreciation Total Operating Cash Flow XXXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX 0 0 0 20,000 Terminal (END of 4th YEAR) 1) Release of Working Capital 2) Salvage value (after tax) Total XXXXXX Project Net Cash Flows 0 0 0 OS NPV = IRR = Payback= COST of CAPITAL (WACC) or DISCOUNT RATE OF THE PROJECT = 10% Q#1 Would you accept the project based on NPV, IRR? Would you accept the project based on Payback rule if project cut-off period is 3 years? Q#2 SENSITIVITY and SCENARIO ANALYIS. Capital Budgeting (Investment ) Decisions Estimate NPV, IRR and Payback Period of the project if Marginal Corporate Tax is reduced to 20%. Would you accept or reject the project? Assume Straight-Line Depreciation. (b) Estimate NPV, IRR and Payback Period of the project if Equipment is fully depreciated in first year and tax rate is reduced to 20%. Would you accept or reject the project? (c) As a CFO of the firm, which of the above two scenario (a) or (b) would you choose? Why? Q#3 What are advantages and disadvantages of using only Payback method
