Explore BrainMass

Explore BrainMass

    Capital budgeting

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

    Create an Excel spreadsheet for a production plant with the following criteria:

    - The company will lease for 5 years at $1,500,000 per year.
    - It will cost the firm $4,000,000 in capital (straight-line depreciation, 5 year life) in year 0.
    - It will cost the firm an additional $150,000 per year after the new production plant is brought online for other expenses.
    - It will generate incremental revenue of $3,500,000 per year.

    Use a 40% tax rate, a 10% cost of capital, and a 12% reinvestment rate. Assume the company will use cash flow to finance the project.

    In a separate document, indicate how the project would fair under hurdle rate scenarios of 10%, 15%, and 20% (based on MIRR).

    © BrainMass Inc. brainmass.com June 4, 2020, 12:39 am ad1c9bdddf

    Solution Summary

    The solution explains how to determine the cash flows for the project and the NPV