Display all work calculations on this Excel spreadsheet to obtain the results for NPV, IRR, MIRR, and payback period, enabling you to make informed decisions based on analysis.

Answer these questions off this Excel spreadsheet below.

Answer these questions at the bottom of the Excel Cash Flow Estimation Worksheet (Please provide answers to the following four questions on the attached Cash Flow Estimation Worksheet. You should show all your work with Excel formulas/equations for all computed numbers for Questions 1, 2 & 3, and concise and direct answers for Question #4 on the attached Cash Flow Estimation Worksheet and answers to tables at the bottom of your spreadsheet, whenever applicable. NO WORK SHOWN, NO POINTS.)

1. Compute the firm's weighted average cost of capital given the info/data in the case. What other approaches/methods can be used to measure the firm's cost of common equity and thus its WACC? To that end, what additional info/data would you need? (Hint: A firm's weighted average cost of capital is equal to ???? = ????(????)(1 - t) + ????????, where ???? and ???? are the weights of debt and equity in the capital structure; ????and ????

are the respective costs of debt and equity; and t is the corporate tax rate; Do no round up your WACC figure.) 2. Develop a capital budgeting schedule using the attached Cash Flow Estimation Worksheet (Excel spreadsheet) that should list all relevant cash flow items and amounts related to the replacement project over the 7-year expected life of the new pumping system. (Reference Reading: "Cash Flow Analysis Example (RIC Project)", one of required Readings for the course.) 3. Based on the capital budgeting schedule, evaluate the replacement project by computing NPV, IRR, MIRR, and Payback Period. Would you recommend to accept or reject the replacement project based solely on your DCF analysis so far? 4. Before you make the final accept/reject decision, what other factors and approaches would you consider further? Discuss also how to PRACTICALLY take into account those factors and approaches in the capital budgeting decision process, whenever applicable.

W N ;e W N - A B c D E F G H | J K L M FALCONVILLE PUMP COMPANY - CASH FLOW ESTIMATION WORKSHEET Input Data (could be more or less than those listed here) Cost of NEW equipment 118000 Annual dep. of old equipment 8000 Salvage value new equipment 8000 Old equipment's depreciable life left 1 Cost of old equipment 48000 Old equipment's depreciated years 5 Depreciation of old equipment till date 40000 Annal cost savings 32000 Salvage value of old equipment 4200 Removal cost of old equipment 1000 Tax rate 0.25 Removal cost of new equipment 1200 WACC 0.10575 Net working capital requirement 6500 [ =0 t=1 t=2 t=3 t=4 t=5 =6 | t=7 I |INVESTMENT OUTLAY A 20 21 17 OPERATING CASH FLOWS OVER THE PROJECT'S LIFE 22 7 After tax decrease in cost 32.000.00 32.000.00 32.000.00 32.000.00 32,000.00 32,000.00 32,000.00 23 8 Depreciation on new machine (16,520.00) (29,500.00) (20,060.00) (15,350.00) (10,620.00) (10,620.00) (10,620.00) 24 9 Depreciation on old machine 15,480.00 2,500.00 11,940.00 16,660.00 21,380.00 21,380.00 21,380.00 25 10 Change in depreciation 16,520.00 29,500.00 20,060.00 15,340.00 10,620.00 10,620.00 10,620.00 26 11 Tax saving from depreciation (3.870.00) (625.00) (2.985.00) (4.165.00) (5.345.00) (5.345.00) (5.345.00) 27 12 Net operating cash flow 26,130.00 31,375.00 29,015.00 27,835.00 26,655.00 26,655.00 26,655.00 28 29 III TERMINAL YEAR CASH FLOWS 30 13 Estimated salvage value of new machine 8,000.00 31 14 Tax effect on sale of new machine (820.00) 32 15 Return of net working capital 6,500.00 33 16 Removal cost of new equipment (1,200.00) 34 17 Total termination cash flows 5.980.00 35 36 IV NET CASH FLOWS 37 18 Net cash flow time line (120,350.00) 26,130.00 31,375.00 29,015.00 27,835.00 26,655.00 26,655.00 26,635.00A B C D E F G H K L M 39 V RESULTS 40 NPV 18,029.00 41 IRR 14.49% 42 MIRR 12.32% 43 Payback peri 4.23 44 45 46 DECISION BASED ON YOUR ANALYSIS: 47 48 49 50 ANSWERS TO QUESTIONS: 51 52 Q#1: 53 54 55 Q#2: 56 57 58 Q#3: 5960 61 Q#4: 62