CAPITAL BUDGETING/PROJECT ANALYSIS
MARCS Depreciation
Rates
Cost of New Equipment(Initial Outlay ) $ 100,000.00
Disposal Amount at the End 14,285.00 Year
1 15.00%
2 15.00%
3 15.00%
4 15.00%
5 15.00%
6 15.00%
7 0.00%
PROJECT FAVOURABLE
Tax Rate 45.00%
Required Rate of Return Discount rate) 6.50%
NET PRESENT VALUE $3,975.60
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
Volume To be Sold ( Quantity) 20000 20000 20000 20000 20000 20000 20000
Selling price per Unit $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Additional Cash Generated $ 200,000.00 $ 200,000.00 $ 200,000.00 $ 200,000.00 $ 200,000.00 $ 200,000.00 $ 200,000.00
Variable Cost $ (300,000.00) $ (300,000.00) $ (300,000.00) $ (300,000.00) $ (300,000.00) $ (300,000.00) $ (300,000.00)
Variable Cost Tax Savings $ 135,000.00 $ 135,000.00 $ 135,000.00 $ 135,000.00 $ 135,000.00 $ 135,000.00 $ 135,000.00
Fixed Cost $ (40,000.00) $ (40,000.00) $ (40,000.00) $ (40,000.00) $ (40,000.00) $ (40,000.00) $ (40,000.00)
Fixed Cost Tax Savings $ 18,000.00 $ 18,000.00 $ 18,000.00 $ 18,000.00 $ 18,000.00 $ 18,000.00 $ 18,000.00
Depreciation $ 6,750.00 $ 6,750.00 $ 6,750.00 $ 6,750.00 $ 6,750.00 $ 6,750.00 $ -
Cash Inflow From The Operations $ 19,750.00 $ 19,750.00 $ 19,750.00 $ 19,750.00 $ 19,750.00 $ 19,750.00 $ 13,000.00
Equipment Disposal $ 7,856.75
Cash Inflow From The Project $ 19,750.00 $ 19,750.00 $ 19,750.00 $ 19,750.00 $ 19,750.00 $ 19,750.00 $ 13,000.00
Year
1 15.00%
2 15.00%
3 15.00%
4 15.00%
5 15.00%
6 15.00%
7 0.00%
PROJECT FAVOURABLE
Tax Rate 45.00%
Required Rate of Return Discount rate) 6.50%
NET PRESENT VALUE $3,975.60
YEAR 1 YEAR 2
Volume To be Sold ( Quantity) 20000 20000
Selling price per Unit $ 10.00 $ 10.00
Additional Cash Generated $ 200,000.00 $ 200,000.00
Variable Cost $ (300,000.00) $ (300,000.00)
Variable Cost Tax Savings $ 135,000.00 $ 135,000.00
Fixed Cost $ (40,000.00) $ (40,000.00)
Fixed Cost Tax Savings $ 18,000.00 $ 18,000.00
Depreciation $ 6,750.00 $ 6,750.00
Cash Inflow From The Operations $ 19,750.00 $ 19,750.00
Equipment Disposal $ 7,856.75
Cash Inflow From The Project $ 19,750.00 $ 19,750.00
CAPITAL BUDGETING/PROJECT ANALYSIS
YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
20000 20000 20000 20000 20000
$ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
$ 200,000.00 $ 200,000.00 $ 200,000.00 $ 200,000.00 $ 200,000.00
$ (300,000.00) $ (300,000.00) $ (300,000.00) $ (300,000.00) $ (300,000.00)
$ 135,000.00 $ 135,000.00 $ 135,000.00 $ 135,000.00 $ 135,000.00
$ (40,000.00) $ (40,000.00) $ (40,000.00) $ (40,000.00) $ (40,000.00)
$ 18,000.00 $ 18,000.00 $ 18,000.00 $ 18,000.00 $ 18,000.00
$ 6,750.00 $ 6,750.00 $ 6,750.00 $ 6,750.00 $ -
$ 19,750.00 $ 19,750.00 $ 19,750.00 $ 19,750.00 $ 13,000.00
$ 19,750.00 $ 19,750.00 $ 19,750.00 $ 19,750.00 $ 13,000.00
13,000.00
$ 19,750.00 $ 19,750.00 $ 19,750.00 $ 19,750.00 $ 13,000.00