Question: Hi How are you can you do this? If so can you do it asap? Thanks You need to evaluate the following Capital Budgeting proposal:

Hi How are you can you do this? If so can you do it asap?

Thanks

Hi How are you can you do this? If so can you

You need to evaluate the following Capital Budgeting proposal: The proposal involves renting space for the venture and requires delivery trucks and other assets. Up Front Issues Building improvements Fleet of Trucks Other Assets Hiring and Training Other Tax-deductible expenses working Capital Capitalize Capitalize Capitalize Expense Expense Depreciation starts in period 1 Projected operating profit (before tax) = Profit will grow for 2 then at 8% for Cost Depreciation (Time 0) Life Class 200.00 15 540.00 7 125.00 3 30.00 Projected Value (End) 0.00 75.00 15.00 15.00 years at 5 a. b. c. d. e. (Improvements are worthless at the end of -50.00 the -project, but you will need to restore the building - Restoration expenses are taxdeductible) 120.00 18% (to give you profit in years 2 and 3) years, then at 4% for the remainder. Tax rate 28.0% Projected life 10.00 years Cost of Capital 9.50% For Terminal Value, assume you will shut down operations and take the cash. 1. MACRS Depreciation Table Compute the NPV IRR MIRR Payback Discounted Payback Year 1 2 3 3 33.33% 44.45% 14.81% 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 7.41% MACRS Table Life Class 5 7 10 20.00% 14.29% 10.00% 32.00% 24.49% 18.00% 19.20% 17.49% 14.40% 11.52% 11.52% 5.76% 12.49% 8.93% 8.92% 8.93% 4.46% 11.52% 9.22% 7.37% 6.55% 6.55% 6.56% 6.55% 3.28% 100.00% 100.00% 100.00% 100.00% 2. a. b. Make 2 Data Tables Evaluate the NPV as a function of the cost of capital Evaluate the MIRR as a function of the cost of Building Improvements 3. Graph those tables 4. Do a Scenario Analysis with the following Scenarios: a. Base Case (as above) b. Optimistic Case Building improvements: Fleet of Trucks Other Assets Initial Profit grows at b. Pessimistic Case Building improvements: 25% Projected Value (End) -25.00 100.00 30.00 for the first two years Projected Value (End) -75.00 Fleet of Trucks Other Assets Initial Profit grows at 10% 50.00 0.00 for the first two years 15 5.00% 9.50% 8.55% 7.70% 6.93% 6.23% 5.90% 5.90% 5.91% 5.90% 5.91% 5.90% 5.91% 5.90% 5.91% 2.95% 20 3.750% 7.219% 6.677% 6.177% 5.713% 5.285% 4.888% 4.522% 4.462% 4.461% 4.462% 4.461% 4.462% 4.461% 4.462% 4.461% 4.462% 4.461% 4.462% 4.461% 2.231% 100.00% 100.00% Capital Rationing Suppose you are in the Corporate Trasurers office and you need to help decide Which projects will be chosen for the upconing year. You have the following information: 1 2 3 4 5 6 7 8 9 10 Project Name Brazil 1 Brazil 2 Panama South Africa Kuwait India 1 India 2 Vietnam South Korea Lithuania Totals Division Americas Americas Americas Af/MidEst Af/MidEst Asia Asia Asia Asia Europe Cost $1,035.67 $1,877.41 $2,572.91 $640.15 $533.23 $782.74 $2,083.32 $1,330.08 $1,435.51 $1,000.07 NPV $1,254.00 $2,524.00 $8,325.00 $825.00 $528.00 $987.00 $1,158.00 $1,648.00 $1,154.00 $951.00 IRR 12.900% 5.900% 7.200% 11.900% 10.300% 5.800% 8.800% 6.100% 14.500% 12.000% 1. If the Capital Budget is 2. Repeat the above if y ou can only take a maximum of 1 project from each Division. Choose 1 1 1 1 1 1 1 1 1 1 $10,000.00 the compute the optimal set of projects. 3 2 4 1

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