Capital Budgeting Analysis
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Practice Capital Budgeting Analysis
Develop an Excel spreadsheet for performing a capital budgeting analysis of the following project:
Based on the following project assumptions, develop a capital budgeting analysis and determine the NPV and the IRR for the project. State your recommendation.
Equipment invoice=$250,000
Transportation and installation= $75,000
Training=$20,000
Projected incremental increase in sales in YR 1 = $240,000.
Sales escalate at a rate of 10% per year after YR 1. Expenses in YR 1 are projected to be 32% of the capital investment. Expenses escalate at a rate of 4% per year after YR 1. Depreciation is straight line, 5 years.
Salvage value at the end of YR 3 =$85,000
WACC=10%
Project life =3 years
Tax rate = 40%
Tax credits may be used against other income.
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