Question #1: Capital Budget Analysis (Sixty-five Points) Based on the inputs below prepare a capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return, Profitability Index and Payback in years methods, determining whether the project is feasible. The Weighted Average Cost of Capital also needs to be determined to complete the analysis Spreadsheet template is provided, you need to fill in and complete the calculations. Project Inputs: Cost of Capital: U.S. Treasury 10-year yield = 4.31% S&P 500 Return = 12.5% Capital Structure = Liabilities (55%), Equity (45%) Firm's Cost of Debt = Prime Interest Rate plus 3% Company's Beta = 1.40 Project Investment Outlay, Year 0 - $750,000 Project Investment Life - 5 years. Project Depreciation - $150,000/year Project Salvage Value - $25,000 Working Capital Base of Annual Sales - 10% Project Tax Rate - 22% Inflation Rate for Selling Price/unit, Variable Cost/unit, and Fixed Costs = 4.0% after Year 1 Units sold per year - 40,000 Selling Price per Unit, Year 1 - $40.00 Fixed operating costs per year excluding depreciation - $175,000 Manufacturing (Variable) costs per unit, Year 1 - $30.00 1

Question \#1: Capital Budget Analysis (Sixty-five Points) Based on the inputs below prepare a capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return, Profitability Index and Payback in years methods, determining whether the project is feasible. The Weighted Average Cost of Capital also needs to be determined to complete the analysis Spreadsheet template is provided, you need to fill in and complete the calculations. Proiect Inputs: Cost of Capital: U.S. Treasury 10 -year yield =4.31% S\&P 500 Return =12.5% Capital Structure = Liabilities (55\%), Equity (45\%) Firm's Cost of Debt = Prime Interest Rate plus 3\% Company's Beta =1.40 Project Investment Outlay, Year 0$750,000 Project Investment Life -5 years Project Depreciation - $150,000/ year Project Salvage Value $25,000 Working Capital Base of Annual Sales - 10\% Project Tax Rate - 22\% Inflation Rate for Selling Price/unit, Variable Cost/unit, and Fixed Costs =4.0% after Year 1 Units sold per year 40,000 Selling Price per Unit, Year 1 - $40.00 Fixed operating costs per year excluding depreciation - $175,000 Manufacturing (Variable) costs per unit, Year 1$30.00 1