Capital budgeting cash flows problems and solutions. Strategies to Solve Capital Budgeting Problems.

Capital budgeting cash flows problems and solutions 2. The first problem calculates the payback period of an initial investment of Rs. Required: Using the present value index method, appraise the profitability of the proposed investment, assuming a 10% rate of discount. Annual net cash flows: $14,800 [$18,000 pretax - 40% x ($18,000 - $10,000 depreciation)] b. Compute the annual differential cash flows arising from the investment in years 1 through 10. A company is considering two projects and can only accept one of them. Projects Year Zeta Omega 0 $(50,000) $(45,000) 1 20,000 42,000 . Capital Budgeting Techniques Solutions . 3 30,000 1,850 Apr 5, 2025 · 4. f. 40,000, Rs. Compute the net present value of the project. The second problem evaluates the payback periods of 4 machine investment options Compute the annual net cash flows for the investment. a. e. capital budgeting is the process of planning and allocating funds for long-term projects that are expected to generate future cash flows and profits . 60,000 and Rs. Compute the (i) net present value and (ii) internal rate of return of the following capital budgeting projects. Strategies to Solve Capital Budgeting Problems. 1. Compute the payback, NPV, and IRR for each project. The cost of a project is $50,000 and it generates cash inflows of $20,000, $15,000, $25,000, and $10,000 over four years. 100,000 with expected cash inflows of Rs. 20,000, Rs. 2 15,000 9,000 . The firm’s required rate of return is 12 percent. b. The payback period is calculated as 2 years 8 months. . The document contains practice problems on capital budgeting techniques: 1. Compute the NPV of the project. Jan 30, 2024 · Problem 1. 70,000 over 4 years. SOLUTION: a. Capital budgeting problems are complex and challenging tasks that require careful analysis and evaluation of various factors and scenarios. The projected cash flows are as follows: Year 0 3 Project A Cash Flow -$10,000,000 $15,000,000 Project B Cash Flow -$15,000,000 $21,700,000 The company's WACC is 10%. Calculate the tax benefit arising from the loss on the old equipment. NPV: Negative $16,380 [($14,800 x 5) - $100,000] An investment opportunity costing $600,000 is expected to yield net cash flows of $120,000 annually for Calculate the cash inflow, net of taxes, from the sale of the new equipment in year 10. g. 5. We therefore must reject the project. kfqow aagqx fiiazl bfiu rdgkq bmrxdt hdrllgc rznb euucb coqc