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Capital Budgeting Analysis

# Capital Budgeting Analysis

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07/14/2013

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CAPITAL BUDGETING ANALYSIS
Scenario
Evaluate each project assuming the following scenarios:a) Cost of capital of 12 percent.b)Cost of capital of 18 percent.
Expected Net Cash Flows Year
Project AProject B
0 (485) (650)1 (400)2052 (225)2253 (75)2254800 2255800 2506975 2507 (100)-
Capital budgeting analysis
is a process used to evaluate potential projects a company may choose as investmentmethods used in capital budgeting include NPV, IRR, MIRR, PI, payback, and discounted payback.In the following problem demo, you will analyze two competing and mutually exclusive projects using NPV and IRRcalculations. Your goal will be investment in a project that generates maximum wealth and value for both the firm aninvestors. Optimal investments are worth more than they cost.Use the tabs at the bottom of the Excel window to navigate through the
seven
sheets of information. On each sheetdocument, first review the content and then examine how that information applies to the two project options. After rall the information, you will review questions that will help you decide which project you will recommend.Elliott Enterprises is considering two investment projects. It will be your responsibility to analyze each of the projects based on NPV, IRR, MIRR, PI, payback, and discounted payback assuming that the twoprojects are mutually exclusive.

Note: Examples of formula calculations in Excel are shown.

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