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Capital budgeting

A new robotic spray painting system will cost General Motors $1,000,000. It has a 10 year life and $0 salvage. Depreciation at $100,000 per year. Increase in net profit after taxes of $100,000.

a. what is the cost of the project?
b. what are the cash flows with respect to amounts and timing?
c. what is the payback on the equipment?
d. what is the internal rate of return?
e. in the cost of capital is 12% what is the net present value?

Solution Summary

The solution explains how to determine the cash flows for the project and calculate payback period, IRR and NPV