06 May Capital Budgeting
Order Instructions
For the business alone and no other assets (such as the building and land), the purchase price is $250,000. The net cash flows for the project are $30,000 per year for the next 5 years. The plan is to borrow the money for this investment at 5%.
You will need to submit a presentation sharing your recommendation. You will need to address the following questions:
What is the net present value of this project? Use the calculations covered in this week’s Video to calculate the net present value.
Calculate the simple payback period for this project. Your desired payback period is 5 years. How long is the payback period for this project?
How would you evaluate this investment? What would be a good price at which to purchase this business?
