Discuss risk methodologies used in capital budgeting

Reference no: EM132226672

Assignment -

Instructions: Considering coffee packaging as an additional diversification to its product line. Here's information regarding the coffee packaging project.

Initial investment outlay of $40 million, consisting of $35 million for equipment and $5 million for net working capital (NWC) (plastic substrate and ink inventory); NWC recoverable in terminal year
Project and equipment life: 5 years
Sales: $27 million per year for five years
Assume gross margin of 50% (exclusive of depreciation)
Depreciation: Straight-line for tax purposes
Selling, general, and administrative expenses: 10% of sales
Tax rate: 35%

Assume a WACC of 10%. (Fill out worksheet provided with above information) Information below are the Power Point Slides. 6 Slides minimum with 150 words per slide minimum.

Do you believe that there was sufficient financial information to make a solid decision on what to do?
Was there further financial information that you required that was not provided to you?
What financial figure do you believe was the determinant to your decision and why? How would you be able to apply this particular financial information to other situations?
Discuss risk methodologies used in capital budgeting.

Attachment:- Assignment Files.rar

Reference no: EM132226672

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