Case+4-Questions - 3. How does the minimum annual cash...

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Case 4-Capital Budgeting 1. Using the financial statements and the notes to the financial statements, determine the amount the Company invested in fixed assets for the current year and the average useful life of its assets. a. What depreciation method does the company use? b. What is the range of useful lives over which fixed assets are depreciated? c. Identify the types of assets 2. Assuming that these investments have an average useful life of XX years and that the company requires a 8% rate of return on such investments for 2009, compute the minimum average annual net cash inflow that would justify this investment.
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Unformatted text preview: 3. How does the minimum annual cash inflow change if the estimated useful life increases by 25%? If the estimated life decreases by 25%? 4. Assuming no residual value, and using the minimum average annual expected cash inflows calculated earlier, determine the accounting rate of return and the payback period. How does the payback period compare to the assets estimated useful life? Is it wise to use the payback method to compare investments whose assets have very different estimated useful lives? 5. Prepare a memo to the CEO summarizing your analyses and conclusions....
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This note was uploaded on 07/08/2011 for the course ACG 4352 taught by Professor Nure. during the Spring '11 term at University of Florida.

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