EXERCISE 3: CASH INFLOWS AND CASH OUTFLOWS With the following capital budgeting elements, identify the cash outflows and cash inflows that you would use to judge the attractiveness of a project by using the time- value-of-money yardsticks: capital assets ($1.5 million), working capital in year 1 ($500,000) and year 2 ($200,000), salaries ($140,000), working capital loan ($190,000), residual value at the end of the 11th year ($1 million), profit for the years 1 to 10 ($300,000), mortgage ($1.1 million), non-cash expense ($50,000), revenue ($300,000). and sunk costs ($100,000). The project's lifespan is 10 years and the cost of capital is 8%.

EXERCISE 3: CASH INFLOWS AND CASH OUTFLOWS With the following capital budgeting elements, identify the cash outflows and cash inflows that you would use to judge the attractiveness of a project by using the time- value-of-money yardsticks: capital assets ($1.5 million), working capital in year 1 ($500,000) and year 2 ($200,000), salaries ($140,000), working capital loan ($190,000), residual value at the end of the 11th year ($1 million), profit for the years 1 to 10 ($300,000), mortgage ($1.1 million), non-cash expense ($50,000), revenue ($300,000). and sunk costs ($100,000). The project's lifespan is 10 years and the cost of capital is 8%.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 5Q

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

EXERCISE 3: CASH INFLOWS AND CASH OUTFLOWS
With the following capital budgetng elements, identify the cash outflows and cash
inflows that you would use to judge the attractiveness of a project by using the time-
value-of money yardstıcks capital assets ($1.5 million), working capital in year 1
($500,000) and year 2 ($200,000), salaries ($140,000), working capital loan ($190,000).
residual value at the end of the 11th year ($1 million), profit for the years 1 to 10
($300,000), mortgage ($1.1 million), non-cash expense ($50,000), revenue ($300,000),
and sunk costs ($100,000). The project's lifespan is 10 years and the cost of capital is
8%.

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