# Ac 556 Week 4 Assingment

**Topics:**Net present value, Internal rate of return, Investment

**Pages:**3 (470 words)

**Published:**August 12, 2012

| Capital Budgeting Problem| | | | | | | |

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Data:| | | | | | | |

Initial investment| $80,000| | | | | | |

Increase in working capital| $20,000| | | | | | |

Length of investment| 6| | | | | | |

Salvage value| $8,000| | | | | | |

Before tax annual cash inflows| $28,500 | | | | | | | Tax rate| 35%| | | | | | |

Discount rate| 14%| | | | | | |

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1. Annual accounting income| | | | | | | |

| Annual cash inflows| $28,500 | | | | | | |

| Depreciation expense| 12,000| | | | | | |

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| EBT| 16,500| | | | | | |

| Income tax| 5,775| | | | | | |

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| Accounting Income| $10,725 | | | | | | |

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2. Annual after tax cash inflows| | | | | | | |

| Accounting income| $10,725 | | | | | | |

| Add back depr. Expense| 12,000| | | | | | |

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| Annual after tax cash inflows| $22,725 | | | | | | | | | | | | | | | |

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3. Payback based upon initial cash outflows| | | | | | | | Initial investment| $80,000| | | | | | |

| Increase in WC| $20,000| | | | | | |

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| Initial cash outflows| $100,000| | | | | | |

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| Annual after tax cash inflows| $22,725| | | | | | | | | | | | | | | |

| Payback| 4.4| years| | | | | |

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4. Discounted payback based upon initial cash outflows| | | | | | | | | | | | | | |

| | Annual cash inflows| 14% PV factor| Discounted cash flows| | Balance of initial investment| Discounted payback| |...

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