PLEASE ANSWER THE QUESTIONS BELOW BASED ONCTHE DATA GIVEN IN THE TABLE

$ $ 205 DOD 16.48% $(120,000 1 Le Period of the Equipment 4 years New equipment cost Equipment ship & install cost Related start up cost Inventory increase htcounts Payable intreuse Equip Salvape Value Estimated End of Year 4 & Sales for first year (1) 1200,000 9 Sales increase per year 135 000 10 Operating cost (50D) 180 Percent of Sales) 25.000 11 Depreciation (Straight Line]/YR 5.000 12 Tax rate 18000 131 Cost of Capital (WACC) -60% 5 $ 3 160.0001 35% 10 Gully depreciated ESTIMATING Outlay Cash Flow Co- 1 YEAR CFO CF4 CF1 1 CF2 2 CF2 3 5 $ Investments Dequpmenos Sieng and tal cos 13 Start up expenses Total Basis Cost243) 4 w Wartung Ca tary Act Payable the Total Oy 200 000 35000) 15.000 1240 000 $ $ 120.000 3 $ 5 $ 5 C200, 0001 Operations Reverso Operating Deprecate En Tags Net Income LOSS TAX SHELD DUE TO LOSS Add back Depreciation Tea Operating Cash Flow 200 000 5 227,00 $ 271212 5 315 326 120 000 5 12740F $ 162 777 $ 100 (60 000 $ 10.00 $ 100.000 20.000 5 33100 3 4 485 S 631 DO $ 115 116 Uy ( (23216 13100 $ 21164 S 215155 B0000 BODO S 0000S 72.000 3 R1554 S 91515 5 100,110 5 5 5 5 20000 Terminal END of th YEARS Release of Warga Salvage van het tax 30 Total 5 15,000 COD 3 H543918133 SU 15 2260.000 5 Proiecte Cash Flow $11.006 IRR- 13.7% Payback 14 NPV COST of CAPITAL (WACC) or DISCOUNT RATE OF THE PROJECT -10% ORT Would you accept the project based on NPV IR? Would you accept the project based on Payback rulet project cut-off period is 3 years? O SENSITIVITY and SCENARIO ANALYIS Capital Budgeting Investment Decision Esma NV, RR and Payback Parod of the property Corpo de Tak seduced to 20% Worce or reject the Assure Straine Depreciation Free NPV And Puyback Pened of the project Equmeniul deperdistear and lax rate reduced to 20% Woo you accept the AnaCFO of them, which of the above all or by wch w DE How would you explain to your CEO What NPV means 56 Q1 57 58 59 Q#2 SENSITIVITY and SCENARIO ANALYIS. Would you accept the project based on NPV, IRR? Would you accept the project based on Payback rule if project cut-off period is 3 years? 61 (a 63 64 (b) 05 66 67 (c) Capital Budgeting (Investment ) Decisions Estimate NPV, IRR and Payback period of the project if Marginal Corporate Tax is reduced to 20% Would you accept or reject the project? Assume Straight-Line Depreciation Estimate NPV, IRR and Payback period of the project if Equipment is fully depreciated in first year and tax rate is reduced to 20%. Would you accept or reject the project? As a CFO of the firm, which of the above two scenario (a) or (b) would you choose? Why? 6 Qf3 How would you explain to your CEO what NPV means? 70 71 T2