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Accounting: Capital budgeting and Decision Making

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The attached spreadsheet has the inputs and capital budget net cash flows analysis for an investment of $1,000,000 over 10 years, with a WACC of 7.67%.

1) Calculate the Net Present Value, IRR, Profitability Index and Payback Years for this capital budget.

2)Prepare a scenario analysis with the following data:
a) Base Case (average scenario)= 25,000 units sold per year= 55% probability
b) Worst case scenario= 18,750 units sold per year- 25% probability
c) Best Case scenario= 31,250 units sold per year- 20% probability
d) Determine the scenario analysis for NPV and IRR?
e) What does the Risk assessment tell you about the project?

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1) Calculate the Net Present Value, IRR, Profitability Index and Payback Years for this capital budget.
Base Case Scenario
Net present value (NPV) ($442,945.70)
IRR -1.93%
Profitability index 0.56
Payback period >10 Years

2) Prepare a scenario analysis with the following data:
a) Base Case (average scenario)= 25,000 units sold per year= 55% probability
b) Worst case scenario= 18,750 units sold per year- 25% probability
c) Best Case scenario= 31,250 units sold per year- 20% ...

Solution Summary

The problem set deals with questions under finance, specifically capital budgeting. The problem set includes net present value, payback and internal rate of return. A Word document and Excel spreadsheet are attached.

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