USING EXCEL

4. Capital Budgeting(NPV analysis): -- FedEx is thinking of purchasing a piece of equipment. The new equipment would be expected to increase operating revenues by $300,000 per year, and increase operating expenses by $100,000 per year. It would cost $500,000 and be depreciated using straight-line to a zero salvage value over a depreciable life of 5 years. FedEx expects to be able to sell the new equipment for $120,000 after 5 years (assume capital gains tax to be zero). The equipment would require additional net working capital of $40,000 up front, and is expected to generate $20,000 in positive net working capital at the end of the 5 years. FedEx's marginal tax rate is 25%. If FedEx requires a 15% rate of return on its investments, should it purchase this piece of equipment? Find both the IRR and the NPV. 4. Capital Budgeting(NPV analysis): -- FedEx is thinking of purchasing a piece of equipment. The new equipment would be expected to increase operating revenues by $300,000 per year, and increase operating expenses by $100,000 per year. It would cost $500,000 and be depreciated using straight-line to a zero salvage value over a depreciable life of 5 years. FedEx expects to be able to sell the new equipment for $120,000 after 5 years (assume capital gains tax to be zero). The equipment would require additional net working capital of $40,000 up front, and is expected to generate $20,000 in positive net working capital at the end of the 5 years. FedEx's marginal tax rate is 25%. If FedEx requires a 15% rate of return on its investments, should it purchase this piece of equipment? Find both the IRR and the NPV