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##### FNT 1 Task 2 Capital Budgeting Analysis

**Description**

solution

**Question**

Task;A. Complete the attached ?Capital Budgeting Template? by doing the following;1. Calculate the net cash flow that should be used for each year in the discounted cash;flow analysis.;2. Calculate the net present value (NPV) of this project using a discount rate equal to;the company?s weighted average cost of capital. Round all dollar amounts to the;nearest whole dollar.;3. Calculate the expected yield on the project using the discounted cash flow internal;rate of return (IRR) method. Round all dollar amounts to the nearest whole dollar.;4. Calculate the accounting rate of return for this project.;5. Calculate the unadjusted payback period. State your answers in years and months.;B. Prepare a computer-based presentation in which you do the following;1. Identify what the correct net cash flow for the second year would be if all cash;expenses were as described in the scenario but there were no depreciation expense.;a. Explain the impact of depreciation on net cash flow for the second year.;2. Based upon your NPV analysis in part A2, make a recommendation to Entrepreneur D;regarding what decision to make.;a. Explain why this is an appropriate action.;3. Based upon your IRR analysis in part A3, make a recommendation to Entrepreneur D regarding what decision to make.;a. Explain why this is an appropriate action.;4. Explain why the accounting rate of return on this project is different from the internal;rate of return for the same capital investment.;5. Explain the relative significance of the unadjusted payback period in this decision;situation.;6. Explain how the weighted average cost of capital should be used in capital budgeting;analysis when utilizing the NPV method.;7. Explain how the weighted average cost of capital should be used in capital budgeting;analysis when utilizing the IRR method.;I can create the computer presentation myself. I need only the answers to the above questions (in section B). the required axplanations, and information to create the computer presentation, in addition, of course, to section A being completed as well (the spread sheet).

Paper#77464 | Written in 18-Jul-2015

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