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Capital Budgeting Worksheet

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Capital Budgeting Worksheet
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  University of Phoenix Material  Capital Budgeting Worksheet Read the scenarios below and select one to review and analyze. Determine the proposal’s appropriateness and economic viability. For all scenarios, assume spending occurs on the first day of each year and benefits or savings occurs on the last day. Assume the discount rate or weighted average cost of capital is 1!. "gnore ta#es and depreciation. Proposal A: New Factory  A company wants to build a new factory for increased capacity. $sing the net present value %&'() method of capital budgeting, determine the proposal’s appropriateness and economic viability with the following information* • +uilding a new factory will increase capacity by !. • -he current capacity is 1 million of sales with a /! profit margin. • -he factory costs 1 million to build. • -he new capacity will meet the company’s needs for 1 years. • -he factory is worth 10 million over 1 years. Proposal B: New Equipment  A company wants to buy a laborsaving piece of e2uipment. $sing the &'( method of capital budgeting, determine the proposal’s appropriateness and economic viability with the following information* • 3abor content is 14! of sales, which are annually 1 million. • -he new e2uipment will save 4! of labor annually. • -he new e2uipment will last / years. • -he new e2uipment will cost 4,. Proposal C: New Advertising Program  A company wants to invest in a new advertising program. $sing the &'( method of capital budgeting, determine the proposal’s appropriateness and economic viability with the following information* • -he new program will increase current sales, 1 million, by 4!. • -he new program will have a profit margin is /! of sales. • -he new program will have a year effect. • -he new program will cost the company 4, in the first year.
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