Capital Budgeting Analysis with Excel Model

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									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
								
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