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
Related questions
Question
Complete the Capital Budgeting Schedule

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
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps

Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you

Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,



Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,



Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,

Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education