# Capital Budgeting Decisions with uneven cash flows

Capital budgeting with uneven cash flows, no income taxes.

Southern Cola is considering the purchase of a special-purpose bottling ma chine for $23,000, It is expected to have a useful life of four years with a $0 terminal disposal value. The plant manager estimates the following savings in cash operating costs:

____Year_____Amount

_____1______$10,000

_____2________8,000

_____3________6,000

_____4________5,000

Total_______$29,000

Southern Cola uses a required rate of return of 16% in its capital budgeting decisions. Ignore income taxes in your analysis,

Compute the following:

1. Net present value

2. Payback period

3. Internal rate of return

4. Accrual accounting rate of return based on net initial investment (Assume straight-line depreciation.

Use the average annual savings in cash operating costs when computing the numerator of the accrual accounting rate of return.)

https://brainmass.com/business/capital-budgeting/capital-budgeting-decisions-with-uneven-cash-flows-20578

#### Solution Summary

The solution calculates Net present value, Payback period, Internal rate of return, Accrual accounting rate of return based on net initial investment.