Capital Budget
Based on the inputs below prepare a capital budget analysis using the Net Present Value, Internal Rate of Return and Payback in years methods of determining whether the project is feasible. Please show your spreadsheet calculations and your final determinations of "go" or "no go" on the project.
Project Inputs:
WACC - the cost of capital is 10.0%
Project Investment Outlay, Year 0 - $200,000
Project Investment Life - 10 years
Project Depreciation - $20,000 / year
Project Salvage Value - $10,000
Working Capital Base of Annual Sales - 10%
Expected inflation rate per year - 5%
Project Tax Rate - 30%
Units sold per year - 25,000
Selling Price per Unit, Year 1 - $35
Fixed operating costs per year
excluding depreciation - $150,000
Manufacturing costs per unit, Year 1 - $25.20