Define the capital budgeting

Assignment Help Finance Basics
Reference no: EM131477399

Question: CAPITAL BUDGETING

X Company is exmanining two mutually exclusive proposals for new capital investment.The data on the proposals are as follows

                                           A                 B
                                          ($)              ($)

Net cash outlay                   40000          50000
Salvage value                         Nil              Nil
Estimated life                      4 years        4 years
Depricistion SLM SLM
Income Tax rate                     50%           50%
Cut off rate for appraisal          10%           10%
EBIT
Ist Year                             12000          14000
2nd Year                            14000          16000
3rd Year                             16000          18000
4th Year                             22000          22000
5th Year                                 -             20000

You are asked to advise which proposal would be financially preferable.

Reference no: EM131477399

Questions Cloud

What ethical issues arise from this investigative practice : Discuss the ways in which the understanding of biology/genetics has affected and continues to affect the development of ethical laws.
Representative work of art or architecture : Select two different civilizations and then select a representative work of art or architecture for each:
The history and future of the field of psychology : As you consider your personal narrative, what tools and insights can you apply from the course to make positive change in your life?
Political or economic histories of india : What connections can you make between the political or economic histories of India, China, Thailand, Russia, Nigeria and the existence of modern slavery today?
Define the capital budgeting : X Company is exmanining two mutually exclusive proposals for new capital investment.The data on the proposals are as follows.
As you conceptualize your approach to mediation : Utilizing your course materials and readings from this week, highlight areas of interest that you would explore with the parties in conflict.
Is marty an australian resident for tax purposes explain : LAWS20060 INDIVIDUAL ASSIGNMENT. Australian citizen and tech genius, Marty Goodson, set up "Planks Pty Ltd", Is Marty an Australian resident for tax purposes
How the realization of beliefs influence the consequences : How might you structure a behavioral approach to working with Ethan in a way that directly addresses his problematic behaviors?
What was the total price for the hardware configuration : What was the total price for the hardware configuration you chose? What manufacture did you choose for your replacement computer?

Reviews

Write a Review

Finance Basics Questions & Answers

  Find the capital structure components

Five million shares issued with a current market price of 6. Equity holders require a 9% return and $10 million face value of Corporate bonds outstanding.

  What is the return on equity

A company has taxable income of $3,200 with a tax rate of 38 percent. Owners equity is: $3400 in stock, $400 in capital surplus, and $100 in retained earnings. What is the return on equity (ROE)?

  Determining the pharmaceuticals or psychotherapy

A researcher is determining if exercising 3 times a week is more effective than pharmaceuticals or psychotherapy. A total of 20 psychiatric patients were  assigned to one of four treatment conditions and asked self-reported depression on a scale o..

  Financial modeling and valuation

financial modeling and valuation

  Conducting a formal hypothesis test

When conducting a formal hypothesis test, there are different errors that may be made, depending on your decision. One decision is to reject the null hypothesis. If you falsely do not reject the null hypothesis, what type of error has been made?

  Evaluate the gain or loss to the lender

The commission rate is 0.5%. The market interest rate is 5.0% and the short rebate rate is 3.0%. Evaluate the gain or loss to the lender.

  What percentage of the company capital structure consists

The stock's price is currently $24.75, its dividend is expected to grow at a constant rate of 7% per year, its tax rate is 35%, and its WACC is 13.95%. What percentage of the company's capital structure consists of debt?

  What should be price of the firm''s stock according to ggm

Suppose that the risk free rate is 5%, the expected market return is 10%, the beta of firm XYZ is 2, the current dividend that XYZ has just paid is 1 and dividends are expected to grow at a rate of 10% per year. What should be the price of the fir..

  Which 1000 bond has the higher yield to maturity a

which 1000 bond has the higher yield to maturity a twenty-years bond selling for 800 with a current yield of 15 or a

  Find the future values of fv of $400 and annuities described

Find the future values of the following ordinary annuities: a. FV of $400 each 6 months for 5 years at a nominal rate of 12 percent, compounded semiannually. b. FV of $200 each 3 months for 5 years at a nominal rate of 12 percent, compounded quarterl..

  What is martha cost of equity

Martha's Pancake House, Inc. just paid its annual dividend of $0.80 a share. The stock has a market price of $13.00 and a beta of 1.04. The return on U.S. Treasury bills is 2.5 percent and the market risk premium is 7.3 percent. What is Martha's c..

  Calculate the net working capital at the end of 2005

Lennox Furniture Company's 2005 balance sheet showed total current assets of $1,200,000. All of the current assets were required in operations, and its current liabilities consisted of $400,000 of accounts payable and $100,000 of accrued wages and..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd