Assignment- Capital Budgeting
• Open a new (fresh) excel workbook to perform you calculations.
• You are allowed only one submission, so please make sure it is the correct one.
• Work independently and do not use class exercise template (or any other template)
• This assignment is due before midnight on 10/8
Consider the following project being evaluated by your company:
• Initial price of the asset is $200,000 will require $15,000 transportation and $5,000 installation.
• Will be depreciated S/L over 4 years to a $5,000 salvage.
• Market value for the asset at end of 5 years is expected to be $12,000 (the asset will be operated for 5 years)
• Net investment in NWC in year 0 (at the initial period) of $30,000
• Sales, first year, expected to be generated by the project $130,000
• Annual cost of goods sold 60% of sales
• Annual sales growth rate 4%
• Marginal tax rate 30%
• Cost of capital 10%
1) Calculate the project cash outflow in year 0 (initial outlay)
2) Calculate annual operating cash flows for year 1-5 (OCF)
3) Calculate the project's terminal cash flow in year 5 (TCF)
4) Calculate the project's NPV, IRR