capital budgeting decision

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FIN419RubricWk4.doc

Week 4: Capital Budget Decision Models – Individual

Content

60%

Points Earned

X/60

Calculate the following problems using Microsoft® Excel®:

· Calculate the NPV for each project and determine which project should be accepted.

 

Project A

Project B

Project C

Project D

Initial Outlay

(105,000.000)

(82,000.00)

(110,000.00)

(75,000.00)

Inflow year 1

53,000.00

51,000.00

25,000.00

45,000.00

Inflow year 2

50,000.00

47,000.00

55,000.00

50,000.00

Inflow year 3

48,000.00

41,000.00

15,000.00

30,000.00

Inflow year 4

30,000.00

52,000.00

21,000.00

62,000.00

Inflow year 5

35,000.00

40,000.00

35,000.00

68,000.00

Rate

7%

10%

13%

18%

· Your company is considering three independent projects. Given the following cash flow information, calculate the payback period for each. If your company requires a three-year payback before an investment can be accepted, which project(s) would be accepted?

 

Project D

Project E

Project F

Cost

205,000.00

179,000.00

109,000.00

Inflow year 1

53,000.00

51,000.00

25,000.00

Inflow year 2

50,000.00

87,000.00

55,000.00

Inflow year 3

48,000.00

41,000.00

21,000.00

Inflow year 4

30,000.00

52,000.00

8,000.00

Inflow year 5

24,000.00

40,000.00

35,000.00

· Using market value and book value (separately), find the adjusted WACC, using a 16% tax rate.

Component

Balance Sheet Value

Market Value

Cost of Capital

Debt

5,000,000.00

6,850,000.00

8%

Preferred Stock

4,000,000.00

2,200,00.00

11%

Common Stock

2,000,000.00

5,600,000.00

13%

Comments:

Calculations and Format

40%

Points Earned

X/40

· Formulas are clearly demonstrated in Microsoft® Excel® for each problem solved.

· The assignment file is presentable, functional, and named properly.

Comments:

Total Percent

100%

Total Earned

X/100 (%)

Additional Comments: