Question: With the following capital budgeting elements identify the cash outflows

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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