Assignment 2: Capital Budgeting

SoccerBoss
Category:
Business & Finance
Price: $15 USD

Question description

Futronics Inc. is a $2 billion firm that sells communications services. Founded in 1937, Futronics has provided consumer products, as well as government systems and services, for well over half a century. Due to a sharp increase in competition, flattened sales, and external economic conditions, Futronics is implementing a corporate overhead reduction program. The proposal is to replace the company’s central office stores with outside vendors. The investment will cost $1,000,000 and yield incremental cash flows of $450,000 in year one (1), $350,000 in year two (2), $300,000 in year three (3), and $250,000 in year four (4). There is no salvage value of the asset, and the firm has a cost of capital of 8%.

  1. Calculate the net present value, internal rate of return, and simple payback. Next, determine the effect that each of the three (3) values will have on the company.

Tutor Answer

(Top Tutor) Daniel C.
(997)
School: Duke University
PREMIUM TUTOR
Studypool has helped 1,244,100 students
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1830 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors