Explore BrainMass
Share

Time Value of Money relative to capital budgeting process

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Time value of money (TVM) is a very important concept. Why is it important for those participating in the capital budgeting process?

Solution Summary

Answer covers Five factors in a Time Value of Money calculation. Approximately 250 words. 1 reference.

\$2.19

Profitability Index

Colorado Texas New Line Replace Acquire Pollute Cumulative NPV
0 \$(1,319,000) \$(3,534,000) \$(1,582,000) \$(4,845,000) \$(24,050,000) \$(1,650,000)
1 \$(233,318) \$(583,296) \$465,263 \$661,105 \$4,374,354 \$-
2 \$525,358 \$1,260,859 \$766,303 \$831,781 \$3,146,041 \$-
3 \$480,408 \$1,104,938 \$725,619 \$710,338 \$3,208,962 \$2,000,000
4 \$443,211 \$975,064 \$696,446 \$628,331 \$3,273,141
5 \$410,525 \$862,103 \$383,065 \$574,938 \$3,338,604
6 \$393,172 \$786,450 \$197,318 \$591,281 \$3,405,376
7 \$372,189 \$744,379 \$192,677 \$608,404 \$3,473,484
8 \$323,470 \$646,834 \$158,739 \$539,522 \$3,542,953
9 \$270,306 \$486,552 \$123,951 \$472,081 \$3,613,812
10 \$235,748 \$2,872,825 \$279,133 \$551,449 \$41,652,800
IRR 18.28% 16.69% 30.84% 5.01% 17.24% 6.62%
MIRR 13.65% 13.41% 16.29% 7.69% 14.61% 6.62%
MIN IRR 10% 10% 13% 8% 13% 8%
Payback 2.44 2.59 2.52 1.27 3.04
NPV \$2,104,956 \$4,939,824 \$2,494,182 \$3,072,136 \$14,217,224 \$26,828,321

Using the data from the attached mini case study and financial spreadsheets attached I need to conduct a profitability index. All work on this index should be included in a detailed excel spreadsheet.

Also using the information from the profitability index please provide recommendations on which capital budgeting projects should be selected and give me reasons based on the profitability index.

Please provide as much information as possible.

View Full Posting Details