Why are sunk costs not included in your analysis

Assignment Help Financial Management

Reference no: EM133403352

Introduction to Finance

Question 1. Please evaluate the investment philosophy of Warren Buffet. On which points do you agree and disagree with him? (up to 200 words)

Questions on Capital Budgeting (topic for this week)

Question 2. A bakery in Champaign, IL is considering the purchase of a $20,000 espresso machine. The coffee maker has an economic life of seven years and will be fully depreciated by the straight-line method. The machine will produce 10,000 cups of coffee per year, with each costing $3.00 to make (including labor costs) and priced at median price of $4.50. Assume that the discount rate is 18 percent and the tax rate is 21 percent. Should the bakery make the purchase?

Question 3. You have performed a capital budgeting analysis for a client but they are confused about two parts of your analysis, please answer the following concerns, please answer in your own words.

a) Why are sunk costs not included in your analysis but opportunity costs are?(Up to 50 words)

b) Why have you included working capital in your analysis and how would working capital be recovered at the end of the project's life? (Up to 50 words)

Reference no: EM133403352

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