whats the capital budgeting worksheet looks like ? And how to get the NPV In this project?
Ctrl Shift Tab CapsLk Esc Fn D N -DI F2 3 4. folder. Notes seek.) Work in thousands. Fixed costs, t=1 them off in my office. Your solution is due at 275 325 300 350 375 Save your work. You will need it for Project 3, a Monte Carlo simulation. 5. Explain your analysis in a one-page memo, which references your worksheet(s). 64% on the back of your paper copy. (I have neither given nor received aid on this exam.) from a colleague, you may not discuss the project with anyone else. If you work with a Determine the amount of time-one fixed costs that will produce a zero NPV. (Use goal 7. Submit Excel and Word files to via Blackboard. Submit the paper versions in class or drop You may work with one other person from either section. This is not a group project. Aside and the directions contained in the "Sample Memo." Both documents are in the resources colleague, submit only one solution containing both names. Write and sign our honor pledge Please follow the formatting guidelines specified in the "Excel Worksheet Formatting Guide," Examples file in the Resources folder on Blackboard. If you are still having problems, see me. If you do not know how to construct a two-variable data table, work the example in the Excel Table 2: Sensitivity analysis for COGS and fixed costs 66% Cost of goods sold/sales (time 3 and after) 68% or via email 70% 72% Gen RE i522/2 3 PM Buffalo Flats Convenience Stores (Taking pride In our work since 1965) DATE: February 3, 2019 T0: Capital budgeting department FROM: .Iohn Rozyckij/P SUBJECT: New convenience store (Project 1) We are thinking of building a new convenience store at the corner of Plymouth and Penobscot Avenues. We expect the store to be in operation for 10 years. (Operations could last longer, but we are not counting on it given the development that is taking place in that area.) The building costs about $1.8 million. Equipment costs another $800 thousand. The new tax law requires that we depreciate the building straight line over 40 years. We would expense the equrpment at time zero. At the end of the project, we expect to sell the equipment for $50 thousand and the building for $500 thousand. These are rough estimates. We expect sales to ramp up quickly for the rst 3 years and then increase at the expected rate of ination, 2.5%. Until we establish the business and gain some economies of scale, we expect our cost of goods sold (COGS) and operating expenses to be higher as a percent of sales for the rst few years. See Exhibit 1. We expect xed costs to be $325 thousand at time 1 and subsequently to increase at the rate of inflation. (We are especially uncertain about fixed costs.) None of the operating expenses includes depreciation expense. Exhibit 1: Sales, cost of goods sold and operating expenses Year a 1 2 3 4 . . . 10 Sales ((1:05) $ 3,000 $ 3,500 $4.01) Cost of goods sold/sales 0.72 0.70 0.68 0.68 . . . 0.68 Operating expenses/sales 0.12 0.10 0.08 0.08 . . . 0.08 We expect to need $80 thousand of net operating working capital (NOWC) at the beginning of the project (time 0). Subsequently, we expect NOWC to be 3% of sales until we recover it. We expect our marginal tax rate (local, state, and federal combined) to be about 30%. However, that might change. A preliminary estimate of the project's opportunity cost of capital is 10%. Frankly, we are tentative about a number of assumptions. iNhat to do Construct a capital budgeting worksheet from scratch. u'sin'g NPV and IRR. 'le sensitivity analysis (data table) for the cost of goods sold and it 2. Page 1 of 2
