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Complete the Capital Budgeting Schedule

Complete the Capital Budgeting Schedule

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Complete the Capital Budgeting Schedule 

Born & Bread Bakery Capital Investment Project Sales per year $ 270,000 Commence at beginning of year 1. Varable cost per year 30% of sales Fixed Costs per year $ 90,000 $ 120,000 Paid prior to approval decision on this equipment (capital expenditure) $ 220,000 Paid, delivered & operational at beginning of year 1 Catering Equipment Survey Equipment Cost (Capex) Net working capital 5,000 Equipment sold for $ 20,000 at end of year 4. Тах 20% Required Return 12% Depreciation (tax) 52,000 Stipulated for both tax and accounting purposes Years>> 1 2 4 Initial Outflows Equipment (Capex) (220,000) Working Capital Total (220,000) Operating Cash Flows Sales 270,000 Variable Costs (81,000) Cost of Sales 189,000 Fixed Costs Depreciation (52,000) Before Tax Cash Flows 137,000 Tax (27,400) After tax Cash Flows 109,600 Add back depreciation Operating Cash Flow (220,000) 109,600 Terminal Cash Flows Working Capital Recovery $ 168,000 $ 20,000 Sale of equipment BV Tax on Gain/loss on disposal Disposal Proceeds Terminal Cash Flow Gain (Loss) -148000 Net Cash Flows (220,000) 109,600 Cumulative Cash Flow (220,000) (110,400) (110,400) (110,400) (110,400) NPV IRR Payback
Transcribed Image Text:Born & Bread Bakery Capital Investment Project Sales per year $ 270,000 Commence at beginning of year 1. Varable cost per year 30% of sales Fixed Costs per year $ 90,000 $ 120,000 Paid prior to approval decision on this equipment (capital expenditure) $ 220,000 Paid, delivered & operational at beginning of year 1 Catering Equipment Survey Equipment Cost (Capex) Net working capital 5,000 Equipment sold for $ 20,000 at end of year 4. Тах 20% Required Return 12% Depreciation (tax) 52,000 Stipulated for both tax and accounting purposes Years>> 1 2 4 Initial Outflows Equipment (Capex) (220,000) Working Capital Total (220,000) Operating Cash Flows Sales 270,000 Variable Costs (81,000) Cost of Sales 189,000 Fixed Costs Depreciation (52,000) Before Tax Cash Flows 137,000 Tax (27,400) After tax Cash Flows 109,600 Add back depreciation Operating Cash Flow (220,000) 109,600 Terminal Cash Flows Working Capital Recovery $ 168,000 $ 20,000 Sale of equipment BV Tax on Gain/loss on disposal Disposal Proceeds Terminal Cash Flow Gain (Loss) -148000 Net Cash Flows (220,000) 109,600 Cumulative Cash Flow (220,000) (110,400) (110,400) (110,400) (110,400) NPV IRR Payback
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