Business Finance
FIN575 Phoenix Discounted Cash Flow & Net Present Value Project

FIN575

University of Phoenix

Question Description

Purpose of Assignment

The purpose of this assignment is for students to employ capital budgeting techniques using time value of money concepts to determine the acceptability of large dollar value assets.

Assignment Steps

Scenario: A firm has potential project to consider that has projected free cash flows of $575,000 for Year 1, $625,000 for Year 2, and 750,000 for Year 3. The projected terminal value at the end of Year 3 is $8,000,000. The firm's Weighted Average cost of Capital (WACC) is 12.5%.

If the initial investment required in year one is $7,000,000.

Would you recommend accepting the investment?

Create a Microsoft® Excel® document addressing the following:

  • Determine the Discounted Cash Flow (DCF) value of the firm.
  • Recommend acceptance of this project using net present value criteria.
  • Display your calculations.

Format assignment consistent with APA guidelines.

Final Answer

Attached.

Cash Flows
PV Factor
PVFCF

1
575.000
0,8889
511.111

Year
2
625.000
0,7901
493.827

Cost of Capital
...

Mrr426 (397)
Carnegie Mellon University

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