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BUSN 5200 Assinment week 8

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Question;BUSN 5200;Homework;Assignment for Week 8;For Week 8, please turn in the answers to the following questions;1. List the three steps that;make up the general approach to capital budgeting.;2. Define an ?Incremental;cash flow? as the term is used in capital budgeting;3. Your firm is considering;buying a new machine that costs $200,000, is expected to generate $110,000 in;new revenue each year and will cost $45,000 a year to operate. If your firm's marginal income tax rate is;35% what is the Net Cash Flow your firm will realize from the new machine;during the first year? Assume the MACRS;depreciation rate for the machine for year 1 is 20%. Note - do not include the cost of the machine;in your answer.;4. Define the payback period;method in capital budgeting and state the payback period decision rule.;5. What;is the payback period of the following project?;Initial;Investment: $50,000;Projected;life: 8 years;Net cash flows;each year: $10,000;6. Consider the following income;statement and answer the questions that follow;Sales (100;units) $200;Variable;costs ($.80 ea) 80;Fixed;Costs 20;EBIT 100;Interest;Expense 30;EBT 70;Income;tax 24;Net;Income 46;a. What is the firm?s Breakeven Point in units?;b. Draw a breakeven chart for this firm.;7. Define the Net present;Value (NPV) method in capital budgeting and state the NPV decision rule. In economic terms, what does the NPV amount;represent?;8. Your firm is looking at a new investment opportunity, Project;Alpha, with net cash flows as follows;---- Net Cash Flows ----;Project Alpha;Initial Cost at T-0 (Now);($10,000);cash inflow at;the end of year 1 6,000;cash inflow at;the end of year 2 4,000;cash inflow at;the end of year 3 2,000;Calculate;project Alpha's Net Present Value (NPV), assuming your firm?s required rate of;return is 10%.;9. Define the Internal Rate;of Return (IRR) method in capital budgeting and state the IRR Decision rule.;10. Calculate the IRR of the;following project;Year Cash Flow;0 -$30,000;1 $40,000;Case;Study Tasks;1. Refer to the Case Study;topic lecture on the Week 7 Content page. Using that information as a guide;complete the Summary and Conclusion section of your report. Then review your entire report, polishing it;for final submission as required. At the;end of the week submit your final, formal report along with your regular;homework (use a separate file for the report).

 

Paper#50173 | Written in 18-Jul-2015

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