Question

With the following capital budgeting elements, identify the cash outflows and cash inflows that you would use to judge the project by using the time-value-of-money yardsticks. Also, calculate the projects
(1) Net present value,
(2) Internal rate of return,
(3) Payback period,
(4) Profitability index.
Capital assets ($2.5 million), capital additions in year 1 ($300,000), working capital in year 1 ($600,000) and year 2 ($300,000), salaries ($140,000), working capital loan ($190,000), residual value at the end of the 11th year ($2 million), profit for the year ($400,000), mortgage ($1.1  million), non-cash expense ($60,000), revenue ($300,000), and sunk costs ($100,000). The project’s lifespan is 10 years and the cost of capital is 8%.



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  • CreatedDecember 03, 2014
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