Capital BudgetingNameInstructorInstitutional AffiliationDateThe project information:Initial capital outlay $40,000,000The project and equipment life is 5 yearsSales 27,000,000$ for 5 yearsGross margin 50% exclusive of depreciationDepreciation is straight lineselling general and administrative expense 10% of salesTax rate 35%Weighted average cost of capital is 10%Computation of net cash flowsSales$ 27,000,000Cost of Goods Sold($ 13,500,000)Gross Profit$13,500,000Selling, general and otherAdministrative expensesDepreciation($7,000,000)Profit before tax$3,800,000Tax (35%)$1,330,000Profit After Tax$2,470,000Add back depreciation$7,000,000Net cash flows$9,470,000($2,700,000)computation of net present ValueYear DescriptionCash flows0Initial Outlay($40,000,000)1.00001net cash flow$9,470,0000.9091$8,609,1772net cash flow$9,470,0000.8264$7,826,0083net cash flow$9,470,0000.7513$7,114,8114net cash flow$9,470,0000.6830$6,468,0105net cash flow$9,470,0000.6209$5,879,9235net working capital$5,000,0000.6209$3,104,500PVIF at 10%net present valuePresent Values($40,000,000)($997,571)Computation of internal rate of returnYear DescriptionCash flows0Initial Outlay($40,000,000)1.0000 ...
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