Capital Budgeting Worksheet Essay

Read the scenarios below and select one to review and analyze. Determine the proposals appropriateness and economic viability. For all scenarios, assume pass occurs on the first day of each year and benefits or savings occurs on the last day. Assume the discount rate or weighted second-rate cost of capital is 10%. Ignore taxes and depreciation.Proposal A New FactoryA company wants to build a new factory for change magnitude capacity. Using the net present value (NPV) method of capital budgeting, line up the proposals appropriateness and economic viability with the by-line informationBuilding a new factory will increase capacity by 30%.The current capacity is $10 million of sales with a 5% net margin.The factory costs $10 million to build.The new capacity will meet the companys needs for 10 years.The factory is worth $14 million over 10 years.Proposal B New EquipmentA company wants to buy a labor-saving piece of equipment. Using the NPV method of capital budgeting, determine the proposals appropriateness and economic viability with the following informationLabor content is 12% of sales, which are annually $10 million.The new equipment will render 20% of labor annually.The new equipment will last 5 years.The new equipment will cost $200,000.Proposal C New Advertising ProgramA company wants to invest in a new advertising program. Using the NPV methodof capital budgeting, determine the proposals appropriateness and economic viability with the following informationThe new program will increase current sales, $10 million, by 20%.The new program will have a service margin is 5% of sales.The new program will have a 3-year effect.The new program will cost the company $200,000 in the first year.