Looking for assistance with the attached accounting homework. I have enclosed the instructions as well as the excel file.

SUBDOMAIN 319.1 - ACCOUNTING & FINANCE
SUBDOMAIN 319.2 - INFORMATION TECHNOLOGY
Competency 319.1.3 Capital Budgeting Analysis -
The graduate correctly applies time
value of money techniques and techniques that ignore present value for capital investment
decisions.
Competency 319.2.1 Technology Tools
- The graduate uses information technology tools
for specified business purposes.
Competency 319.2.5 Information Management
- The graduate selects appropriate
technology applications to manage information and make decisions in given situations.
Objectives:
319.1.3-01:
Calculate net present value based on a given set of facts.
319.1.3-02:
Apply the results of a net present value calculation to a given decision
situation.
319.1.3-03:
Calculate internal rate of return based on a given set of facts.
319.1.3-04:
Apply the results of an internal rate of return calculation to a given decision
situation.
319.1.3-05:
Calculate the period of time required to recoup the money expended for new
equipment in a given situation.
319.1.3-06:
Calculate the accounting rate of return based on a given set of facts.
319.1.3-07:
Explain the relationship of the accounting rate of return to the internal rate of
return for the same capital investment alternative.
319.1.3-08:
Calculate net cash flow in a given situation.
319.1.3-09:
Explain the impact of depreciation on net cash flow.
319.1.3-10:
Explain the role of the weighted average cost of capital in capital budgeting
analysis.
319.2.1-04:
Produce a computer-based presentation on a business topic.
319.2.5-05:
Demonstrate the appropriate use of specified software application in a given
situation.
It is imperative that you enter your first initial and last name in the fields
designated on the template. Your work and results will be based on an
individualized dataset that will auto load in the template when you enter your first
initial and last name. Your work will not be correctly graded if you fail to complete
these fields.
Introduction:
Entrepreneur D supplements income from a professional practice by investing in start-up
and other business opportunities that meet specific investment criteria. Entrepreneur D
operates all of these extra business activities as a single limited liability company and
utilizes discounted cash flow analysis as a primary tool for evaluating each potential
investment. There is an opportunity to purchase the patent for a newly invented gardening
tool that Entrepreneur D would manufacture and sell on a wholesale basis. Entrepreneur D
has asked you to prepare an analysis of this investment opportunity and make a
recommendation regarding the course of action to take.
Given:
Entrepreneur D plans to retire from professional practice and cease all business activities
nine years from now. The plan for the garden tool is to produce and sell it for eight years

and then sell the patent and production rights to a national company. Entrepreneur D has
negotiated a tentative lease on a building that is well suited for this manufacturing process.
The building must be remodeled to meet manufacturing needs, and then it must be restored
to its original configuration at the end of the eight-year lease. At that time Entrepreneur D
will be able to sell some of the non-specialized equipment (e.g., forklifts) for small salvage
values.
•
Building remodeling and new equipment purchases will require a front-end investment.
The remodeling and equipment costs will be capitalized and depreciated over the eight-year
period as one depreciation calculation using straight line depreciation. Realizable salvage
value from disposing of the equipment at the end of eight years is estimated at
approximately $60,000. There is no salvage value for the remodeling improvements.
The remodeling cost is given on the template in your individualized dataset.
•
Additional working capital will be required for business operations. The working capital
required is given on the template in your individualized dataset.
•
Estimated annual cash receipts from tool sales are forecasted for the eight years of
expected operations. The expected cash receipts are given on the template in your
individualized dataset.
•
Estimated cash expenses for materials, salaries, supplies, utilities, and other cash
expenses are projected for each of the eight years of expected operations. The expected
cash expenses are given on the template in your individualized dataset.
•
The lease on the building requires that it be restored to its original configuration at the
end of the expected eight years of operation. The estimated restoration cost s number is
given on the template in your individualized dataset.
•
The working capital tied up in this project will become available for other types of
investments at the end of the eight-year period.
Entrepreneur D has asked you to assume a 12% applicable weighted average cost of
capital.
Entrepreneur D has also asked you to assume a combined federal and state income tax
rate. The tax rate is given on the template in your indvidualized dataset.
Task:
A.
Complete the attached “Capital Budgeting Template” by doing the following:
1. Calculate the net cash flow that should be used for each year in the discounted cash
flow analysis.
2. Calculate the net present value (NPV) of this project using a discount rate equal to
the company’s weighted average cost of capital. Round all doll
ar amounts to the
nearest whole dollar.
3. Calculate the expected yield on the project using the discounted cash flow internal
rate of return (IRR) method. Round all dollar amounts to the nearest whole dollar.
4. Calculate the accounting rate of return for this project.
5. Calculate the unadjusted payback period. State your answers in years and months.
B. Prepare a computer-based presentation in which you do the following:
1.
Identify what the correct net cash flow for the second year would be if all cash
expenses were as described in the scenario but there were no depreciation expense.
a.
Explain the impact of depreciation on net cash flow for the second year.
2. Based upon your NPV analysis in part A2, make a recommendation to Entrepreneur D
regarding what decision to make.
a. Explain why this is an appropriate action.
3. Based upon your IRR analysis in part A3, make a recommendation to Entrepreneur D

#### Top Answer

Building restoration cost is to be added in the last year and it has been added... View the full answer