Explore BrainMass
Share

Explore BrainMass

    Accounting: Capital budgeting and Decision Making

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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?

    © BrainMass Inc. brainmass.com April 4, 2020, 12:44 am ad1c9bdddf
    https://brainmass.com/business/financial-ratios/accounting-capital-budgeting-decision-making-571808

    Attachments

    Solution Preview

    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.

    $2.19

    ADVERTISEMENT