Capital Budgeting Finance Homework HELP!!!?

Posted on 2014-04-17 07:22:00 in Finance by HOCKEY GOALIE BH

-tax rate=35%

-discount rate=8%

-3 years to complete

-must buy $350 billion machine depreciated over 7yrs to zero. Will be sold in 3yrs for 80 billion

-annual construction costs 120 billion/yr for 3yrs

-rev = 120 billion/year

-annual maintenance for 25 years is 30 billion

-Working capital requirements will be $15 billion, starting immediately and for year 1 and year 2 only $3 billion thereafter (years 3-27). All working capital will be recovered at the end of



1. (1 pt.) How did you get the value (after-tax proceeds from the sale of machine)?

2. (1 pt.) How did you get the value (cash flow from operation in year 1?

3. (1 pt.) How did you get the value (cash flow from operation each year in years 4-27?

4. (1 pt.) How did you get the value (terminal value excluding operating cash flows in year 28?

5. (1 pt.) How did you get the value (Net cash flows or FCF for years 1-28)?



Investment decision

6. (1 pt.) Calculate the payback period (1 pt.) Should they build the tunnel and why?



7. (1 pt.) Calculate NPV of the project. (1 pt.) Should they build the tunnel and why?



8. (1 pt.) Calculate IRR of the project. (1 pt.) Should they build the tunnel and why?



9. (1 pt.) What is the MIRR of the project? (1 pt.) Should they build the tunnel and why?



10. (1 pt.) What is the PI of the project? (1 pt.) Should they build the tunnel and why?



How do you find the answers using excel???

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