Purchase Solution

Capital Budgeting Techniques

Not what you're looking for?

Ask Custom Question

Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $20,000 and will be depreciated in an asset class which carries a CCA rate of 30 percent. It will be sold for scrap metal after 3 years for $5,000. The grill will have no effect on revenues but will save Johnny's $10,000 in energy expenses. The firm has other assets in this asset class. The tax rate is 35 percent.

a. What are the operating cash flows in years 1 to 3 years?
b. What are total cash flows in years 1 to 3?
c. If the discount rate is 12 percent, should the grill be purchased?

STUDENT: expenses NOT one time, IT IS per annum

Purchase this Solution
Solution Summary

This explains the Net present value technique to evaluate the project.

Solution Preview

Year0 Year 1 Year 2 Year 3
Cash Flows -15000 10000 10000 10000
After tax cash flows 6500 6500 6500
Salvage ...

Purchase this Solution
Free BrainMass Quizzes
Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Motivation

This tests some key elements of major motivation theories.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

View More Free Quizzes
Related BrainMass Solutions

  • Capital Budgeting Techniques for a Utility Company

    655814 Capital Budgeting Techniques for a Utility Company What two capital budgeting techniques should a Finance Manager of a utility company consider to use for some upcoming projects and how can the company benefit from them?

  • Using a Capital Budgeting Worksheet

    This then makes capital budgeting techniques a corollary concept of strategic financial management. Second, we can therefore argue that the use of capital budgeting techniques is a vital tool in effective strategic financial management.

  • Capital Budgeting Analysis for Global Projects

    Running Head: CAPITAL BUDGETING Capital Budgeting for Global Projects Capital Budgeting Analysis for Global Project The capital budgeting decisions are also known as the investment decisions.

  • Capital Budgeting Techniques Using Net Present Value

    =14% Using one of the capital budgeting techniques (ie, NPV, IRR, Profitability Index, or Payback period), explain which is the preferred project.

  • Capital Budgeting Techniques: NPV, PI, IRR, MIRR, and Payback.

    609887 Capital Budgeting Techniques: NPV, PI, IRR, MIRR, and Payback. Using the CSU Online Library and the unit reading assignment, explore the capital budgeting techniques covered in the unit, NPV, PI, IRR, and Payback.

  • Three Capital Budgeting Techniques

    The use of other techniques. The limitations of the three capital budgeting techniques on capital expenditures are discussed.

  • Cost of Capital-Capital Budgeting

    178189 Cost of Capital-Capital Budgeting How does cost of capital financing techniques affect the organization? How do you use capital budgeting and relevant cash flow to compare investment alternatives?

  • Weighted Average Cost of Capital, NPV, IRR - Capital Budgeti

    ** Please find your solution attached. ** Detailed calculation using Capital Budgeting Techniques - Explanation and calculation of a firm's WACC and use that WACC to calculate NPV and evaluate IRR for proposed capital budgeting projects which have capital

  • Net Present Value in capital budgeting techniques: Proposal

    Capital budgeting is therefore indispensable in the process of maximizing firm value. The net present values in capital budgeting techniques are examined. The proposal for a new factory is examined.

  • Tools For a Captital Budget Analysis

    423301 Brief Summary on the Concept of Capital Budgeting This is an introduction to Capital Budgeting. It introduces five types of capital budgeting techniques used to evaluate proposed investments.

View More Related Solutions