Bowman Technology Systems (BTS) is considering a project that has the following cash flow and financial data.

• BTS's weighted average cost of capital = 11%
• BTS anticipates that it can earn 2.5% on funds that it places with its broker
• BTS's income tax rate = 25%
• BTS determined that its CAPM return for its common stockholders' equity = 15%
• Before investing in this proposed project, BTS's balance sheet reported the following:

Total assets = $5,000

Total liabilities = $1,500

Common equity = $3,500

Year	0	1	2	3	4	5
Cash flow	-1100	400	390	380	370	360

TASKS >> Please:

[1] Show for BTS the calculation detail behind each of the following capital budgeting metrics:

[a] Net present value

[b] Internal rate of return

[c] Modified internal rate of return

[d] Payback period

[2] Write a narrative that:

[a] distinguishes between the internal rate of return and the modified internal rate of return

[b] identifies what each metric assumes about what a firm does with the cash flows that it receives from its investment projects.

[c] explains how to interpret the value you calculated for BTS's net present value... Be sure to relate your net present value interpretation to the values above reported by DTS's balance sheet.

[d] why the simplistic payback metric can be a useful tool for businesses undertaking major asset purchases

[e] why DTS should either undertake -- or reject -- this proposed project