CapitalBudgeting_201.. - CITT

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Discounted Cash Flow – Net Present Value (NPV) • Example Problem • The following business case will be used to develop a capital budgeting worksheet in Excel that will quickly calculate the NPV for this investment proposal. • The K. WattsaVolt Inc. Company, a manufacturer of electronic components is considering the purchase of a new fully automated machine, called the Eddison, to replace an older, manually operated one. • The following is the relevant information obtained: ©2012, Varmelous Ind. Inc. -- Slide 32
Discounted Cash Flow – Net Present Value (NPV) • Example Problem • The required rate of return on projects of this kind is 20%. • The company is in the 40% combined corporate tax-bracket, • Both machines belong to an asset class which Revenue Canada requires that they use the declining balance method CCA (Capital Cost Allowance) at a rate of 30%. • The project life has been set at 5 years. • The salvage value of this new machine is expected to be $12,000 after five years, and the asset class will continue to remain open. ©2012, Varmelous Ind. Inc. -- Slide 33
Page 1 and 2: Capital Budgeting Learning Outcomes
Page 3 and 4: The Concept of the Cost of Capital
Page 9 and 10: Difficulty and importance in findin
Page 11 and 12: Capital Budgeting • When evaluati
Page 13 and 14: Capital Budgeting • Cash Flows: -
Page 15 and 16: Capital Budgeting • Discounted Ca
Page 17 and 18: Discounted Cash Flow - Net Present
Page 31: Discounted Cash Flow - Net Present
Page 39 and 40: Discounted Cash Flow - (IRR) IRR DC
Page 41: About the presenter • Michel has

CapitalBudgeting_201.. - CITT

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