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(Solved) You need to evaluate the following Capital Budgeting proposal: The proposal involves renting space for the venture and requires delivery trucks and...


This is a capital budgeting analysis. Please see attached. Please show all work so I know how you arrived at the answer and can perform the calculations myself. Thank you!

You need to evaluate the following Capital Budgeting proposal:
The proposal involves renting space for the venture and requires delivery trucks and other assets. Up Front Issues
Building improvements
Fleet of Trucks
Other Assets
Hiring and Training
Other Tax-deductible expenses
working Capital Capitalize
Capitalize
Capitalize
Expense
Expense Cost
Depreciation
(Time 0)
Life Class
200.00
15
540.00
7
125.00
3
30.00 -50.00
15.00 Depreciation starts in period 1
Projected operating profit before tax and depr (EBITDA) =
Profit will grow for
2
years at
then at
8%
for
5 120.00
18%
(to give you profit in years 2 and 3)
years, then at
4% Tax rate
28.0%
Projected life
10.00 years
Cost of Capital
9.50%
For Terminal Value, assume you will shut down operations and take the cash.
1.
a.
b.
c.
d.
e. Compute the
NPV
IRR
MIRR
Payback
Discounted Payback a.
b. Make 2 Data Tables
Evaluate the NPV as a function of the cost of capital
Evaluate the MIRR as a function of the cost of Building Improvements 2. Projected
Value (End)
0.00
75.00
15.00 3. Graph those tables 4. Do a Scenario Analysis with the following Scenarios:
a. Base Case (as above) b. Optimistic Case
Building improvements:
Fleet of Trucks
Other Assets
Initial Profit grows at b. 25% Projected
Value (End)
-25.00
100.00
30.00
for the first two years 10% Projected
Value (End)
-75.00
50.00
0.00
for the first two years Pessimistic Case
Building improvements:
Fleet of Trucks
Other Assets
Initial Profit grows at other assets.
MACRS Depreciation Table (Improvements are worthless at the end of
the -project, but you will need to restore the
building - Restoration expenses are taxdeductible) ive you profit in years 2 and 3)
for the remainder. MACRS T
Lif
Year
1
2
3 3
33.33%
44.45%
14.81% 4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21 7.41% 100.00% MACRS Table
Life Class
5
7
10
20.00% 14.29% 10.00%
32.00% 24.49% 18.00%
19.20% 17.49% 14.40%
11.52%
11.52%
5.76% 12.49%
8.93%
8.92%
8.93%
4.46% 11.52%
9.22%
7.37%
6.55%
6.55%
6.56%
6.55%
3.28% 15
5.00%
9.50%
8.55%
7.70%
6.93%
6.23%
5.90%
5.90%
5.91%
5.90%
5.91%
5.90%
5.91%
5.90%
5.91%
2.95% 20
3.750%
7.219%
6.677% 6.177%
5.713%
5.285%
4.888%
4.522%
4.462%
4.461%
4.462%
4.461%
4.462%
4.461%
4.462%
4.461%
4.462%
4.461%
4.462%
4.461%
2.231%
100.00% 100.00% 100.00% 100.00% 100.00% Capital Rationing
Suppose you are in the Corporate Trasurers office and you need to help decide Which projects will be chosen for the
upconing year. You have the following information:
HINT: Choose the Simplex LP Solving Method unless Solver tells you that it found that the problem is non-linear.
Then go to Options and UNCHECK the option that says "Ignore Integer Constraints." 1
2
3
4
5
6
7
8
9
10 Project
Name
Brazil 1
Brazil 2
Panama
South Africa
Kuwait
India 1
India 2
Vietnam
South Korea
Lithuania
Totals Division
Americas
Americas
Americas
Af/MidEst
Af/MidEst
Asia
Asia
Asia
Asia
Europe Cost
$1,035.67
$1,877.41
$2,572.91
$640.15
$533.23
$782.74
$2,083.32
$1,330.08
$1,435.51
$1,000.07 NPV
$1,254.00
$2,524.00
$8,325.00
$825.00
$528.00
$987.00
$1,158.00
$1,648.00
$1,154.00
$951.00 IRR
12.900%
5.900%
7.200%
11.900%
10.300%
5.800%
8.800%
6.100%
14.500%
12.000% 1. If the Capital Budget is $10,000.00 then compute the optimal set of projects. 2. Repeat the above if you can only take a maximum of 1 project from each Division. cts will be chosen for the e problem is non-linear. Choose
1
1
1
1
1
1
1
1
1
1 set of projects.

 


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