Capital-Budgeting-Analysis-of-Automated-Material-Handling-System-Case-Study-16-58-help
In this module, you will have an opportunity to demonstrate your understanding of a capital budget. The principles of capital budgeting are applicable to all industries.
Refer to Case Study 16-58, Capital-Budgeting Analysis of Automated-Material-Handling System, at the end of Chapter 16. Build or use an existing Excel Spreadsheet and complete requirements 1, 2, and 3.
For this case study, you will demonstrate your ability to correctly calculate the problem and demonstrate creative thinking by analyzing the case and answering the questions that are intended to interpret the data.
HELPFUL HINTS FOR ASSIGNMENT POSTED IN ANNOUNCEMENT THIS WEEK:
The net present value of the proposed investment is $(235,280), calculated as follows:
Instant Dinners, Inc.
Net-Present-Value Analysis
|
Time 0 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
Year 6 |
Year 7 |
Year 8 |
||||||||||
|
New equipment …………………………………… |
$(4,500,000 |
) |
||||||||||||||||
|
Working capital …………………………………… |
(1,000,000 |
) |
$1,000,000 |
|||||||||||||||
|
Disposition of |
||||||||||||||||||
|
 Old forklift trucks |
100,000 |
|||||||||||||||||
|
 New conveyor |
100,000 |
|||||||||||||||||
|
Operating revenue |
$700,000 |
$700,000 |
$700,000 |
$700,000 |
$700,000 |
$700,000 |
$700,000 |
700,000 |
||||||||||
|
Operating savingsa |
600,000 |
600,000 |
600,000 |
600,000 |
(200,000 |
) |
600,000 |
600,000 |
600,000 |
|||||||||
|
Tax effect b………………………………………….. |
160,000 |
(335,000 |
) |
(335,000 |
) |
(335,000 |
) |
(335,000 |
) |
(15,000 |
) |
(295,000 |
) |
(295,000 |
) |
(335,000 |
) |
|
|
 Total cash flows |
$(5,240,000 |
) |
$965,000 |
$965,000 |
$965,000 |
$965,000 |
$485,000 |
$1,005,000 |
$1,005,000 |
$2,065,000 |
||||||||
|
12% discount |
´    1.000 |
|
´     .893 |
|
´     .797 |
|
´     .712 |
|
´     .636 |
|
´   .567 |
|
´    .507 |
|
´    .452 |
|
´    .404 |
|
|
Present value ………………………………………. |
$(5,240,000 |
) |
  $861,745 |
|
  $769,105 |
|
  $687,080 |
|
  $613,740 |
|
$274,995 |
|
$  509,535 |
|
$  454,260 |
|
$  834,260 |
|
|
Net present value ………………………………… |
$  (235,280 |
) |
||||||||||||||||
*From Table III in Appendix A.
See attachment with question and Excel sheet to put answers. ******ONLY ANSWER QUESTION 1, 2 and 3 ******** Must complete in attached Excel worksheet (already set up so should be easier).
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