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Capital Budget Evaluation Techniques for Guillermo Furniture

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See attached file for data.

Guillermo Furniture, a company that manufactures midgrade and high-end sofas, has just hired you as an accountant. The owner, Guillermo Navallez, has assigned you the tasks of determining which decisions provide the greatest returns.

Recommend a course of action based on a capital budget evaluation technique and include present value calculations as part of your recommendation.

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Solution Summary

I used net income as a proxy for future cash flows and estimated earning for five years. I used total assets as the investment. These are not reasonable assumptions but it gives you a template to use so that when you have these amounts, you will be all set. Solution attached as Excel.

I also created my own numbers that were more reasonable so you can see how it works with credible amounts.

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See attached file.

I used net income as a proxy for future cash flows and estimated earning for five years. I used total assets as the ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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