Question: Based on the inputs below prepare a capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return, Profitability Index
Based on the inputs below prepare a capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return, Profitability Index and Payback in years methods, determining whether the project is feasible. Please show your spreadsheet calculations and your final determinations of "go" or " no go" on the project. Use your Capital Budget Analysis from Week #6 as an example for this analysis. WACC - Debt is 75% and Equity is 25% of this firm's capital structure. Interest rate on the debt is 7.5%, firm's tax rate is 30%. Firm's beta is 1.25. Risk Free Rate is 2.0%. Market Return Rate is 11.0%. Project Investment Outlay, Year 0- $1,000,000 Project Investment Life - 10 years Project Depreciation - $100,000/year Project Salvage Value - $30,000 Working Capital Base of Annual Sales - 10% Expected inflation rate per year - 3.0% Project Tax Rate - 30% Units sold per year - 40,000 Selling Price per Unit, Year 1 - $40.00 Fixed operating costs per year excluding depreciation - $175,000 Manufacturing (Variable) costs per unit, Year 1 - $30.0 In your intership with Lewis, Lee, & Taylor Inc. you have been asked to forecast the firm's additional funds needed (AFN) for next year. The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation. what is the AFN for the coming year? Last year's sales - S_o $200,000 Last year's accounts payable $50,000 Sales growth rate = g 20% Last year's notes payable $15,000 Last year's total assets = A_o* $135,000 Last year's accruals $20,000 Last year's profit margin = PM 10.0% Target payout ratio 50.0% Based on the inputs below prepare a capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return, Profitability Index and Payback in years methods, determining whether the project is feasible. Please show your spreadsheet calculations and your final determinations of "go" or " no go" on the project. Use your Capital Budget Analysis from Week #6 as an example for this analysis. WACC - Debt is 75% and Equity is 25% of this firm's capital structure. Interest rate on the debt is 7.5%, firm's tax rate is 30%. Firm's beta is 1.25. Risk Free Rate is 2.0%. Market Return Rate is 11.0%. Project Investment Outlay, Year 0- $1,000,000 Project Investment Life - 10 years Project Depreciation - $100,000/year Project Salvage Value - $30,000 Working Capital Base of Annual Sales - 10% Expected inflation rate per year - 3.0% Project Tax Rate - 30% Units sold per year - 40,000 Selling Price per Unit, Year 1 - $40.00 Fixed operating costs per year excluding depreciation - $175,000 Manufacturing (Variable) costs per unit, Year 1 - $30.0 In your intership with Lewis, Lee, & Taylor Inc. you have been asked to forecast the firm's additional funds needed (AFN) for next year. The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation. what is the AFN for the coming year? Last year's sales - S_o $200,000 Last year's accounts payable $50,000 Sales growth rate = g 20% Last year's notes payable $15,000 Last year's total assets = A_o* $135,000 Last year's accruals $20,000 Last year's profit margin = PM 10.0% Target payout ratio 50.0%
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