1. Develop a capital budgeting decision model showing cash flows, cost of capital, and decision metrics (i.e., npv, mirr, irr, payback, and discounted payback). Form a conclusion based upon the analysis. develop the analysis within an Excel spreadsheet.
   • Assume the costs except depreciation are uncertain for the new machine. Develop the analysis in a spreadsheet and evaluate the sensitivity of the results for costs of 300, 400 and 700.
   • Assume straight-line depreciation on both machines.
   • The cost of capital is calculated based upon funding from retained earnings and from debt. The company is assumed to fund itself with 40% debt and 60% retained earnings. The cost of debt capital, rD, is 8%. The cost of capital from retained earnings, rS, is based upon the capital asset pricing model. The risk free rate in the market is 3% and the difference between the expected return on the market and the risk free rate is 5%. The beta for the company is 1.5. The tax rate is assumed to be 40%.
   • Assume all other assumptions as given.