AssignmentCapitalBudgetingFall2016 - Intermediate Financial Management FIN 390 Assignment Fall 2016 CAPITAL BUDGETING Self Review-Payback Discounted

# AssignmentCapitalBudgetingFall2016 - Intermediate Financial...

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Intermediate Financial Management – FIN 390 – Assignment – Fall 2016 CAPITAL BUDGETING Self Review: -Payback & Discounted payback -Internal rate of return (IRR) -Net Present Value (NPV) -Depreciation -Profitability Index (PI) -Incremental cash flows Self Review Assignment Use the following information to answer questions 1 through 5:Briarcrest Condiments is a spice-making firm. Recently it developed a new process for producing spices. This calls for acquiring machinery that would cost \$1,968,450. The machine will have a life of five years and will produce cash flows as shown in the table below. Assume a discount rate of 15.9 percent.YearCash Inflows1\$512,4962-242,6373814,5584887,2255712,6421. What is the net present value of the project?2. What is the IRR of the project?3. What is the payback of the project?4. What is the discounted payback of the project?5. What is the profitability index of the project?6. A company expects the working capital accounts to be the following amounts in year 1 due to a capital budgeting project:Year 0Year 1Inventory\$10,000\$12,000Accounts receivable\$12,000\$11,000Accounts payable\$8,000\$9,000Calculate the change in net working capital that is attributable to the project.7. Consider an asset that costs \$640,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for \$175,000. If the relevant tax rate is 35 percent, what is the after-tax cash flowfrom the sale of the asset?Extend the Basics:Modified Internal Rate of Return (Chapter 12)Analyzing risk of cash flows (Chapter 13)Lease financing (Chapter 19)Assignment:MIRR and Cash Flow Estimation