Week 6: Capital Budgeting Discuss the capital budgeting process (how projects are approved) and the data inputs used in selecting among proposals. Then using the attached discounted cash flow worksheet respond to this assignment. Air Co. is expanding its operations. It is considering adding facilities in either Portland, Oregon or Tampa Bay, Florida. Calculate the following measures for the Air Co. projects. Net Present Value (use =NPV in Excel) Internal Rate of Return (use IRR in Excel) The payback period (not discounted) The profitability index Relevant financial data follows. The useful life of the new facility is 10 years. The company uses 5% as the hurdle rate in order to discount future cash flows. Select the preferred project. (000s omitted) Initial Investment in year 0 Cash received per year from additional sales revenues (years 1-5) Cash paid per year for operating costs (years 1-5) Major Maintenance (year 6) Cash Received per year (years 6-10) Cash paid per year (years 6-10) Salvage value cash received upon disposal (year 10) Portland Tampa Bay $100,000 $150,000 25,000 40,000 (15,000) (18,000) (2,500) (3,000) 30,000 50,000 (18,000) (21,000) 15,000 25,000