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Project Description:

student template for bga1 - 308 1 8-01-04 06-11 (capital investment task)



projected income statement for new product
year 1 year 2 year 3 year 4 year 5 year 6
expected annual sales of new product 894400 894400 894400 894400 894400 894400

expected costs of new product:
direct materials 436800 436800 436800 436800 436800 436800
direct labor 166400 166400 166400 166400 166400 166400
overhead 130000 130000 130000 130000 130000 130000
depreciation on new asset 120000 80000 53333 25556 25556 25556
selling and administrative expenses 60000 60000 60000 60000 60000 60000
income before taxes -18800 21200 47867 75644 75644 75644
income tax at 25% marginal rate 0 5300 11967 18911 18911 18911
net income -18800 15900 35900 56733 56733 56733
net cash flow 105900 95900 89233 82289 82289 82289

check figures are provided for this table so that you don't have to unecessarily redo your work beyond this point.
do not work beyond this point unless all of your numbers agree with the corresponding check figures.
although you will not use these totals in working this task, the following are provided as check figures:
the sum of net cash flow for the first three years is $291,033; ******your total cash flow is 291,033
for the last three years it is $246,867************************************your total cash flow is 246,867
because the discount factors are different, net cash flow in the above table must be accurate for each year.
if you cannot figure out how to get your numbers to match the check figures by using the suggested learning resources,
you should contact your mentor or progress manager.



payback period: running
(add rows as necessary cash flows balance
to show your calculations) investment ----------------- 400000
year 1 105900 -294100 5 years, 4 months -4
year 2 95900 -198200
year 3 89233 -108967
year 4 82289 -26678 use the above box to identify the payback
year 5 82289 55611 point in years, months.
year 6 82289 137900



net present value: present
cash flows pv factors value
year 1 105900 15% 92087
year 2 95900 15% 72514
year 3 89233 15% 58672
year 4 82289 15% 47049
year 5 82289 15% 40912
year 6 82289 15% 35576
working capital return 40000 15% 17293
salvage return 30000 15% 12970

total present value 377073
investment 400000
net present value -22927



internal rate of return:
cash flows
investment -400000
year 1 105900
year 2 95900
year 3 89233
year 4 82289
year 5 82289
year 6 + working capital + salvage return 152289

internal rate of return 12.908%



profitability index 0.942683362
(in the cell to the right calculate the profitability index for the asset, enter the formula you used.)
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Price Type: Negotiable

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