FIN 486 Week 4, Individual Assignment - Capital Budgeting Scenarios

Apr 24th, 2015
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FIN 486 Week 4, Individual Assignment - Capital Budgeting Scenarios

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Capital Budgeting Scenario)FIN 486 Strategic Financial ManagementNameDateInstructorCapital Budgeting Scenario Considering the information for the Proposal concerning the building of the new factory, the incremental cash flows are needed for the NPV analysis. The incremental cash flows are sales of $3 million a year which equals an increase in gross margin by $150,000 given a 5% gross margin and initial on investment of $10 million which is the cost of building the new factory. The savage value at the end of the project life will be $14 million.Given a 10% weighted average cost of capital, the following table shows the net present value that is computed for this project.YearCash FlowPV FactorPresent Value0 (10,000,000) 1.0000 (10,000,000)1 150,000 0.9091 136,364 2 150,000 0.8264 123,967 3 150,000 0.7513 112,697 4 150,000 0.6830 102,452 5 150,000 0.6209 93,138 6 150,000 0.5645 84,671 7 150,000 0.5132 76,974 8 150,000 0.4665 69,976 9 150,000 0.4241 63,615 10

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