Capital Budgeting Spreadsheet Project Introduction This project is an application of capital…

Capital Budgeting Spreadsheet Project Introduction This project is an application of capital budgeting and cash flow analysis. The Excel template is similar to what I might build in the so-called real world, and could be very useful to have on a flash drive somewhere for future reference To make the project easier, I recommend using the template to build the example problem (based on Holliday Manufacturing, as discussed in the video) before trying the actual problem in the template. Once you have the example built and the numbers match the illustrations below, you know your spreadsheet works

Capital Budgeting Spreadsheet Project Introduction This project is an application of capital budgeting and cash flow analysis. The Excel template is similar to what I might build in the so-called real world, and could be very useful to have on a flash drive somewhere for future reference To make the project easier, I recommend using the template to build the example problem (based on Holliday Manufacturing, as discussed in the video) before trying the actual problem in the template. Once you have the example built and the numbers match the illustrations below, you know your spreadsheet works correctly. Then substitute the assumptions for the actual project and the spreadsheet will do the computations. Watch the depreciation assumptions on Gamma vs Holliday. The Example Holliday Manufacturing is considering the replacement of an existing machine. The new machine costs $1.2 million and requires installation costs of $150,000. The existing machine can be sold currently for $185,000 before taxes. The old machine is 2 years old , cost $800,000 when purchased, and has a $384,000 book value and a remaining useful life of 5 years. It was being depreciated under MACRS using a 5-year recovery period, so it has the final 4 years of depreciation remaining. If it is held for 5 more years, the machines market value at the end of year 5 will be zero. Over its 5-year life, the new machine should reduce operating costs by $350,000 per year, and will be depreciated under MACRS using a 5-year recovery period. The new machine can be sold for $200,000 net of removal and cleanup costs at the end of 5 years. A $25,000 increase in net working capital will be required to support operations if the new machine is acquired. The firm has adequate operations against which to deduct any losses experienced on the sale of the existing machine. The firm has a 9% cost of capital and is subject to a 40% tax rate. Should they accept or reject the proposal to replace the machine? Heres how the template would be populated with the information for Holliday: Notice the payback period: I dont normally use a fancy formula to automate the computation, it is too much trouble for the time savings. At the end of Year 3, the company has recouped all but $234,600of the initial investment. That amount divided by the next years cash flow (234600/258800) tells me the remainder is 0.91. Add that to the 3 full years I counted and I get the payback period of 3.91 The Project Consider the following scenario: Gamma Inc. is considering the replacement of an existing machine. The new machine costs $1.8 million and requires installation costs of $250,000. The existing machine can be sold currently for $125,000 before taxes. The existing machine is 3 years old , cost $1 million when purchased, and has a $290,000 book value and a remaining useful life of 5 years. It was being depreciated under MACRS using a 5-year recovery period. If it is held for 5 more years, the machines market value at the end of year 5 will be zero. Over its 5-year life, the new machine should reduce operating costs by $650,000 per year, and will be depreciated under MACRS using a 5-year recovery period. The new machine can be sold for $150,000 net of removal and cleanup costs at the end of 5 years. A $30,000 increase in net working capital will be required to support operations if the new machine is acquired. The firm has adequate operations against which to deduct any losses experienced on the sale of the existing machine. The firm has a 15% cost of capital, is subject to a 40% tax rate and requires a 42-month payback period for major capital projects. Should they accept or reject the proposal to replace the machine? What is the NPV? What is the IRR? What is the payback period? Use the following table for depreciation: 5-Year MACRS Year 1 20% Year 2 32% Year 3 19% Year 4 12% Year 5 12% Year 6 5% Required Use the Excel template on the class webpage (Capital Budgeting Template.xls) and analyze the scenario above. Answer the question, Should they accept or reject the proposal to replace the machine? below the area of the spreadsheet with the NPV, IRR and PBP.

Elite Writer Help
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.

Essays

Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.

Admissions

Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.

Reviews

Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.

Reviews

Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.