Capital Budgeting Decisions

Chee Company has gathered the following data on a proposed investment project:

Investment required in equipment………….

Don't use plagiarized sources. Get Your Custom Essay on
Capital Budgeting Decisions
Just from $13/Page
Order Essay

$320,000

Annual cash inflows…………………………….

Year 1: $50,000

Year 2: 50,000

Year 3: 60,000

Year 4: 40,000

Year 5: 65,000

Year 6: 50,000

Year 7: 70,000

Year 8: 65,000

Salvage value………………………………………

$60,000

Life of the investment…………………………..

8   years

Required rate of return…………………………

10%

Assets will be depreciated using straight

line depreciation method

Required:

1. Show all calculations in good form. Answers without supporting calculations will earn zero marks.

2. Calculate the annual incremental net income for all eight (8) years.

3. Using the net present value and the internal rate of return methods, is this a good investment?

ORDER NOW »»

and taste our undisputed quality.