FRANKLIN

LUMBER
CAPITAL
BUDGETING
By Group 5
PROCEDURES
ARLANDO PUTRA ARVIANTO |
2403222102
A ROPIANTA GINTING M |
2403222103
MUHAMMAD RAVI ISMAIL |
2403222104
1. Annual cash flow of Dakota and Nakoi
  Dakota Nakoi
Cash-inflows (sales 7,000 units per day x 240 days x $1.80 per unit 6,000 units per day x 240 days x $1.80 per unit
revenue) $3.024.000,00 $2.592.000,00
70% x $3,024,000 70% x $2,592,000
Less COGS
$2.116.800,00 $1.814.400,00
Gross Profit $907.200,00 $777.600,00
Less Labor Cost $245.000,00 $276.000,00
Less Maintenance Cost $60.000,00 $52.000,00
Less Overhead Cost $60.000,00 $78.000,00
EBITDA $542.200,00 $371.600,00
$1,300,000 : 7 years $750,000 : 7 years
Less Depreciation
$185.714,29 $107.142,86
EBIT $356.485,71 $264.457,14
Less Tax (40%) $142.594,29 $105.782,86
NPAT $213.891,43 $158.674,29
Add Depreciation $185.714,29 $107.142,86
Annual Cash Flow $399.605,71 $265.817,14
 2. Capital Budgetting Method
  Methods Dakota Nakoi
A Innitial Investment (a) $1.300.000,00 $750.000,00
  Annual Cashflow (b) $399.605,71 $265.817,14
  Payback Period (a/b) 3,25 years 2,82 years
Book Value = Residual Asset / Salvage Value –
B Year Net Income Book Value Year Net Income Book Value
Depreciation
    1 $213.891,43 $1.114.285,71 1 $158.674,29 $642.857,14
    2 $213.891,43 $928.571,43 2 $158.674,29 $535.714,29
    3 $213.891,43 $742.857,14 3 $158.674,29 $428.571,43
    4 $213.891,43 $557.142,86 4 $158.674,29 $321.428,57
    5 $213.891,43 $371.428,57 5 $158.674,29 $214.285,71
    6 $213.891,43 $185.714,29 6 $158.674,29 $107.142,86
    7 $213.891,43 $0,00 7 $158.674,29 $0,00
  Average Net Income (c)   $213.891,43     $158.674,29  
  Average Book Value (d)   $650.000,00     $375.000,00  
Average Accounting Rate of Return (AARR)
    32,91%     42,31%  
(c/d)

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2. Capital Budgetting Method

  Methods Dakota Nakoi

C Year (t) After-tax FCF Year (t)
  0 -$1.300.000,00
  1 $399.605,71
  2 $399.605,71
    3 $399.605,71
  4 $399.605,71
  5 $399.605,71
  6 $399.605,71
  7 $789.605,71
  Year 7 after-tax market value (residual value)   $390.000,00
  Interests Rate of Return (IRR)   26,27%
After-tax FCF
0 -$750.000,00
1 $265.817,14
2 $265.817,14
3 $265.817,14
4 $265.817,14
5 $265.817,14
6 $265.817,14
7 $340.817,14
  $75.000,00
  30,38%

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2. Capital Budgetting Method

  Methods Dakota Nakoi

D NPV = $509.143,00 NPV = $384.106,00

 E   PI = 1,39 PI = 1,51

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3. Rank the plywood presses with above
parameters
Plywood Presses Payback Period AARR IRR NPV PI
Dakota 3,25 32,91% 26,27% $509.143,00 1,39
Nakoi 2,82 42,31% 30,38% $384.106,00 1,51

Both IRR >

Parker9s criterion Both AARR > market
acceptable market
was 2 years return rate (15%)
Investment Decision return rate at 15% Both NPV > 0 Both PI > 1.0x
payback with max 3 and book return rate
and higher than
years. (20%)
book return at 20%

Nakoi has higher Nakoi has higher

Nakoi has shorter
AARR, company will IRR, reflected to Dakota has higher
Rating payback period <3 Nakoi has higher PI.
earn $0.41 on every shorter payback NPV.
years.
$1 invested. period.

Nakoi ranks at #1 after winning 4 indicators (Payback Period, AARR, IRR and PI), while Dakota ranks #2 with higher NPV.
Another point of Nakoi is lower initial investment cost, therefore Nakoi9s PI is higher.
4. Do the techniques rank project the
same? If not, why do the rankings differ?
The techniques do not perform the same rank to capital budgeting decision, ie. IRR vs NPV and NPV
vs PI.

IRR and NPV have different ranking for the plywood presses. Nakoi wins IRR while Dakota takes
higher NPV.

NPV is used to analyze the profitability of a projected investment (NPV = present value of cash inflows –
present value of cash outlays). NPV is used when cash flows are inconsistent and to evaluate long-term
projects.

IRR is used to estimate the profitability of a potential investment (IRR = zero net present value in a
discount rate flow analysis). IRR is used to evaluate short-term projects.

Dakota's higher NPV is triggered by high terminal cash flow at Year 7 (residual at 30% of initial
investment while Nakoi's residual at only 10%) while annual operating cash flow is not impacting
much (Dakota : Nakoi = 3 : 2 against initial investment Dakota : Nakoi = 2 : 1).
 5. Positioning of Payback Period and
Average Accounting Rate of Return
Methods (AARR)

  Dakota Nakoi
Simple and Easy Math No factor of Time Value of Money into calculation.
Can help small business with limited and shorter funds for
Payback Period investment. Flat annual cash inflows.
Method
Helps in reducing the risk of losses. No take the cash inflows after the payback period.
Helps in evaluating project quickly.  
Only based on accounting numbers. No Time Value of Money takes into calculation.
AARR Method Easy to calculate and simple to understand. Ignore cashflow from investment.
Based on accounting book profit / earnings. Ignore terminal value of the project.
6. Jonas and Parker have discussions on
Net Present Value (NPV) and Internal
Rate of Return (IRR).
a) The meaning of NPV and IRR.

IRR is used to estimate the profitability of potential investments, while NPV is the
difference between the present value of cash inflows and the present value of cash
outflows over a period of time.

IRR uses NPV at zero value to balance the minimum required rate to pay off initial
investment (cash outlays) within agreed period of time, while NPV is calculating the
operating cash flow with acceptable market return rate as discounted rate over the period to
determine the present value and deducted with initial investment fund. If NPV results to
above 1.0 or positive figure, then the project is acceptable.

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6. Jonas and Parker have discussions on
Net Present Value (NPV) and Internal
Rate of Return (IRR).
b) The criteria for NPV and IRR.

Criteria NPV IRR

Higher than cost of capital or market return rate will be

Accept Positive or >1.0 indicates the profitable investment.
profitable for investment.

Lower IRR compared to cost of capital associates with

Reject Negative or <1.0 likely displays a net loss.
losses.

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6. Jonas and Parker have discussions on
Net Present Value (NPV) and Internal
Rate of Return (IRR).
c) Advantages and disadvantages of NPV
No. Advantages: Disadvantages:
1
Takes Time Value of Money into investment consideration. No guidelines for required rate of return as reference.
2 Helps decision-making process to identify profitable or loss
No appropriate to compare different sizes of projects.
investment.
3 Does not count hidden cost, sunk cost or other preliminary
Takes cost of capital and risk into consideration.
cost incurred.
4 Helps to determine the feasibility of present investment with
Need assumption for cost of capital.
the future cashflows.

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6. Jonas and Parker have discussions on
Net Present Value (NPV) and Internal
Rate of Return (IRR).
d) We can use all the techniques to calculate and compare each other for better preview
and review. Each technique and method has the unique and specific purposes, ie IRR is
used to determine short-term projects, resulting high IRR, than long-term projects which
ends with low IRR. NPV is effective for long-term projects because it renders the time
value of money from each period of time, but NPV is not effective in comparing two
mutually exclusive projects which require different amount of investment.
7. Advantages and disadvantages of PI

No. Advantages Disadvantages

Takes Time Value of Money into investment consideration,

1 as PI is a ratio of present value of cash inflows on present Ignoring sunk costs.
value of cash outlays.

2 Considers all cash flows of entire projects. Difficulty to determine the required rate of return.

3 Assists the selection of projects that fit the budget Too optimistic projections.
4 Easy to understand. Not factoring in the opportunity cost.
8. Parker surely takes the cash flow projection and estimation seriously,
accuracy on assumption and accounting value will trigger the close-to-
reality projection and will reduce the financial risk incurred, especially
the capital budget and cash flow cycle to finance the liquidity and fix to
payback period to avoid any additional cost.
Parker will be following below steps for cash flow projection accuracy:

a) Estimate the annual operating cash inflows and incremental cash flow, assuming the increasing production capacity,
reducing scrap products, efficiency of new machines, surge market sales.
b) Fulfillment cash flow is including net future cash flows to be accounted in, discounting with expected return rate, and explicit
risk adjustment. Net future cash flow usually comprises of explicit, current, unbiased and probability weighted estimate of the
future cash outflows and inflows.
c) Estimate the Year 7 after-tax final value of sold new assets as terminal cash flow.
d) Set the desired payback period to assure the remaining life time of investment will be revenue generator, no more investment
payback.
e) Set the desired market rate of return as benchmark for internal rate of return and accounting rate of return for project
evaluation.
f) Perform the auditing and financial review process on stages during the projects against actual, to get the insights, control the
budget and assure the cash flow in place.
9. a) No "unbiased" forecast are associated into future cash flow
estimation, and this was found by auditor that predicted cash flows were
less than the actual cash flows, this resulted to inaccuracy cash flow
projection.
We are surprised on the statement by auditor of "projected cash flows were lower than actual without unbiased factors", which usually
the event should be contrary.
Please find below conditions / assumptions that might happen with no unbiased factors in the projection:
Condition 1: Projected cash flows usually would be
  above than actual.
Flat, stabile and constant accounting figures, ie. Production
capacity, labor cost, overhead and maintenance cost, selling
a. price, etc., which do not reflect the reality in case over the period
of 7-years.
Straight-line depreciation throughout the 7-years, this has
shortened the pay-back period, while in real case, depreciation
b. will be enlarged in the first some years to accommodate book
value trend.
c. No inflation rate is attached.
There is no capital structure accounted as the fund source of
investment, neither from the long- term debt nor from the equity.
d. This will generate the interest, although interest payment is
excluded from operating cash flow. This cost of capital will
determine the feasibility of project through IRR calculation.
Time value of money factor has taken place on the NPV and
e. some applied techniques.
Condition 2: Projected cash flows were
lower than actual (post audit9s findings).
Incremental of manufacture and market activities, ie. arise on
selling price, increasing production capacity and outputs to
respond increasing demand / market, new machines provide
lower labor cost and lower maintenance cost.
Longer time horizon of project of 7-years (14% annual rate) while
the machinery usually has time frames of depreciation at 5 years
(20% rate). And if accounting book is referring to 5-year
depreciation rate, then actual cash flow might be above than
estimation.
Conservative projection at the beginning.
Possibility lower the cost of capital, either because of low real
riskless rates, low inflation, low betas, or low risk premiums, the
larger the value consequence of assuming an permanent omitted
downside.
Efficiency takes place, resulting to lower material cost and lower
overhead cost.
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9.b) If estimation on cash flow is consistently lower than the actual cash
flow, some conditions are triggered such as:

A firm will lose another investment opportunity, in the regards of investment fund. Company will focus
on selected investment project with the limited fund to cover the certain period of payback. If projected
I
cash flow is lower, then payback period is longer and company will hold another investment. This is
mutually exclusive investment.
A firm might prolong the depreciation period to coupe with projected cash flow. This would render to
II
higher actual cash flow with shorter depreciated accounting book.
Lower cash flow projection would reflect to be reducing business activities, ie block the new launched
II products, numbers of purchased material (opportunity cash flow = discount supplier rate), new market
opening, etc.
10. Respond to Parker9s capital
budgeting procedures:
What? Why?
Like:  
Parker preferred using simple and easy to understand
Simple method will prompt the decision-making process.
methods on investment decision making.
AARR and Payback Period techniques are adequate to see
Parker9s favorite methods were AARR and Payback Period. the eligibility of project for required settlement period and
desired return rate (investment9s yield).

FAPG is covering allowable projects invested by company

which have related to core business, simple technique for
Parker referred to Fixed Asset Purchase Guidelines (FAPG). small investment (amounting to $15,000) and different
technique for big investment (plant modernization,
expansion, machinery purchase).
Dislike:  
Time value of money is impacting the present value of
Parker9s both methods were excluding time value of money
required cash flow during the investment period, with the
calculation.
discounted marker rate.
Unbiased, relevant, current, history, calculated, and explicit
Those techniques only weigh on annual cash inflows
factors are being factored into the variables used to
projection subsided by depreciation. These depend on
determine the cash flow and risk associated in the cash flow
assumption made to accounting book.
estimation.
11. Suggestions to Parker re his capital
budgeting procedures are:

a) Parker should apply discounted cash flow into capital budgeting, to determine the value of an
investment based on its future cash flows. This will calculate the present value of expected
future cash flows using a discount rate. If the output is above the current cost of investment,
the result is positive.
b) Higher volatile future cash flows will determine higher discount rate to produce capital
budgeting.
c) To count in the residual asset turnover / salvage value (as terminal cash flow) at the end of
time frame will add the present value of cash inflow.
d) The relevant and simple techniques are NPV (for amount output), IRR (for rate of return) and/
or Discounted Payback Period (for required period).
12. Recommendation was NAKOI.
Points on Dakota
a) Competitive advantages:
- higher production rate (7,000 units per day),
- lower labor cost ($35 per unit vs Nakoi's $46),
- a bit higher maintenance cost (due to high price, USA
product),
- lower overhead cost, as easier to operate,
- higher residual asset sale (30% on initial price vs Nakoi9s - Inefficiency and salvage value have been taken into account
10%).
b) Higher NPV at $509,143 (33% higher than Nakoi's).
Generally, people will see NPV as superior technique to
determine investment decision and believe higher NPV
would fulfil the main purpose of corporate which is to
maximize the shareholders9 value / wealth.
Points on Nakoi
a) Competitive advantages:
- Lower initial investment (~58% to Dakota's investment).
- Lower maintenance cost (Japan's product).
Note:
- Durability and product quality are assumed acceptable on
the same review period of 7 years and same selling price.
under expenses / cost.
b) Capital budgeting techniques:
- Shorter payback period (2.82 years against Dakota's 3.25
years).
- Higher AARR and IRR (42% and 30%) than Nakoi's (33%
and 26%).
- Higher Profitability Index PI at 1.51x (compared to Nakoi's
1.39x).

Parker's favorable techniques of AARR and Payback Period

will win this Nakoi.

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12. Recommendation was NAKOI.
c) Analysis of capital rationing
Find the comparison on financial performance among Dakota and Nakoi below.

Notes taken:
• Briefly, Dakota9s performance is better and higher than Nakoi9s, except investment Dakota took 73%
higher than Nakoi.Dakota's net income is 35% higher than Nakoi9s; cash flow is 50% higher; NPV is
33% higher, and Net Cash Flow (= Initial cash flow + Operational cash flow + Terminal cash flow) is
59% higher.
• Ratio to investment exhibits Nakoi higher than Dakota.For example, Dakota's net income to investment
is 16%, while Nakoi9s is 21%.

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12. Recommendation was NAKOI.
c) Analysis of capital rationing

• Dakota of 7,000 units capacity can be replaced by 2 units Nakoi of total

12,000 units produced.
• If the budget supports to purchase Dakota at $1.3bio, this can be considered
to have 2 units Nakoi of $1.5bio.
• If the budget does not support to invest $1.3bio, then 1 unit Nakoi ($0.75bio)
is sufficient.
• NPV of 2 units Nakoi will obtain $768,212 (51% higher than Dakota9s), while
initial investment was 15% above Dakota's).
• 2 units of Nakoi have opportunity earnings in future, if demand exceeds 7,000
units per day (there is no market size data re the product).

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12. Recommendation was NAKOI.
c) Analysis of capital rationing

From calculation sheet;

• It is not feasible and profitable to produce 7,000 units with 2 units Nakoi, this results to
NPV minus, PI < 1.0, IRR and AARR < 15% and payback period > 4years.
• Therefore, it suggests to produce at max capacity (12,000 units) to expand both the
market and earnings.
• Minimum units produced are 7,700 with the result of payback period not exceed 5
years, AARR and IRR > 15%, NPV and PI > 1.0.
• Or, just deploy 1 (one) unit Nakoi for 6,000 units capacity for good result.
 13. Some parameters were revised by
Parker to adjust the capital budgeting
into the market.
a. Cash flow projection
Production Floor Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Dakota Unit 7.000 7.000 7.000 7.000 7.000 7.000 7.000
Days 240 240 240 240 240 240 240
Price $1,80 $1,87 $1,95 $2,02 $2,11 $2,19 $2,28
Sales revenue $3.024.000 $3.144.960 $3.270.758 $3.401.589 $3.537.652 $3.679.158 $3.826.325
Material cost 72% 72% 72% 72% 72% 72% 72%
Less COGS ($2.177.280) ($2.264.371) ($2.354.946) ($2.449.144) ($2.547.110) ($2.648.994) ($2.754.954)
Gross profit $846.720 $880.589 $915.812 $952.445 $990.543 $1.030.164 $1.071.371
Less labor cost ($245.000) ($254.800) ($264.992) ($275.592) ($286.615) ($298.080) ($310.003)
Less maintenance cost ($60.000) ($62.400) ($64.896) ($67.492) ($70.192) ($72.999) ($75.919)
Less overhead cost ($60.000) ($62.400) ($64.896) ($67.492) ($70.192) ($72.999) ($75.919)
EBITDA $481.720 $500.989 $521.028 $541.869 $563.544 $586.086 $609.529
New assets $1.300.000            
Depreciated years 7            
Less depreciation ($185.714) ($185.714) ($185.714) ($185.714) ($185.714) ($185.714) ($185.714)
EBIT $296.006 $315.275 $335.314 $356.155 $377.830 $400.372 $423.815
Less tax 40% ($118.402) ($126.110) ($134.126) ($142.462) ($151.132) ($160.149) ($169.526)
NPAT $177.603 $189.165 $201.188 $213.693 $226.698 $240.223 $254.289
Add depreciation $185.714 $185.714 $185.714 $185.714 $185.714 $185.714 $185.714
Annual cash flow $363.318 $374.879 $386.903 $399.407 $412.412 $425.937 $440.003

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 13. Some parameters were revised by
Parker to adjust the capital budgeting
into the market.
a. Cash flow projection

Dakota Year Cashflow

Discounted
cashflow
Payback
Payback
period
Net Income Book value

0 ($1.300.000) ($1.300.000) ($1.300.000)      

1 $363.318 $310.528 ($936.682) 1 $177.603 $1.114.286
2 $374.879 $273.854 ($561.803) 1 $189.165 $928.571
3 $386.903 $241.571 ($174.901) 1 $201.188 $742.857
4 $399.407 $213.144 $224.507 0,44 $213.693 $557.143
5 $412.412 $188.106 $636.919   $226.698 $371.429
6 $425.937 $166.047 $1.062.856   $240.223 $185.714
7 $830.003 $276.553 $1.892.860   $254.289 $0
End Period Asset
Sold $390.000          
Discount Rate   17%        
TOTAL   $369.803   3,44 $214.694 $650.000

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 13. Some parameters were revised by
Parker to adjust the capital budgeting
into the market.
a. Cash flow projection
Production Floor Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Nakoi Unit
Days
6.000
240
6.000
240
6.000
240
6.000
240
6.000
240
6.000
240
6.000
240
Price $1,80 $1,87 $1,95 $2,02 $2,11 $2,19 $2,28
Sales revenue $2.592.000 $2.695.680 $2.803.507 $2.915.647 $3.032.273 $3.153.564 $3.279.707
Material cost 72% 72% 72% 72% 72% 72% 72%
Less COGS ($1.866.240) ($1.940.890) ($2.018.525) ($2.099.266) ($2.183.237) ($2.270.566) ($2.361.389)
Gross profit $725.760 $754.790 $784.982 $816.381 $849.037 $882.998 $918.318
Less labor cost ($276.000) ($287.040) ($298.522) ($310.462) ($322.881) ($335.796) ($349.228)
Less maintenance cost ($52.000) ($54.080) ($56.243) ($58.493) ($60.833) ($63.266) ($65.797)
Less overhead cost ($78.000) ($81.120) ($84.365) ($87.739) ($91.249) ($94.899) ($98.695)
EBITDA $319.760 $332.550 $345.852 $359.687 $374.074 $389.037 $404.598
New assets $750.000            
Depreciated years 7            
Less depreciation ($107.143) ($107.143) ($107.143) ($107.143) ($107.143) ($107.143) ($107.143)
EBIT $212.617 $225.408 $238.710 $252.544 $266.931 $281.894 $297.456
Less tax 40% ($85.047) ($90.163) ($95.484) ($101.017) ($106.772) ($112.758) ($118.982)
NPAT $127.570 $135.245 $143.226 $151.526 $160.159 $169.136 $178.473
Add depreciation $107.143 $107.143 $107.143 $107.143 $107.143 $107.143 $107.143
Annual cash flow $234.713 $242.387 $250.369 $258.669 $267.302 $276.279 $285.616
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 13. Some parameters were revised by
Parker to adjust the capital budgeting
into the market.
a. Cash flow projection

Nakoi Year Cashflow

Discounted
cashflow
Payback
Payback
period
Net Income Book value
0 ($750.000) ($750.000) ($750.000)      
1 $234.713 $200.610 ($515.287) 1 $127.570 $642.857
2 $242.387 $177.067 ($272.899) 1 $135.245 $535.714
3 $250.369 $156.323 ($22.531) 1 $143.226 $428.571
4 $258.669 $138.039 $236.138 0,09 $151.526 $321.429
5 $267.302 $121.919 $503.440   $160.159 $214.286
6 $276.279 $107.704 $779.719   $169.136 $107.143
7 $360.616 $120.156 $1.140.335   $178.473 $0
End Period Asset
Sold $75.000          
Discount Rate   17%        
TOTAL   $271.818   3,09 $152.191 $375.000

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13. Some parameters were revised by
Parker to adjust the capital budgeting
into the market.
a. Cash flow projection
The calculation from above tables exhibits below table:
  DAKOTA NAKOI
Payback Period 3,44 3,09
AARR 33,03% 40,58%
IRR 25,36% 28,09%
NPV $369.803 $271.818
PI 1,28 1,36

Some notes taken are:

• Above all the results from capital budgeting techniques show declining.
• Increasing sales revenue (due to rising of selling price) is net off by increasing expenses with the
similar rate. EBIT, NPAT and Cash Inflows increases slightly from previous conditions. This reduces the
AARR and IRR and prolongs the payback period.
• The most impact is discount rate rose from 15% to 17% per annum, producing the lower NPV and PI.

• The recommendation remains go to NAKOI.

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13. Some parameters were revised by
Parker to adjust the capital budgeting
into the market.
b. Scenario growth of market price par with cash cost at (i) 3% and (iii) 5% as shown below.
The calculation from above tables exhibits below table:
  Scenario 1 Scenario 2
  DAKOTA NAKOI DAKOTA NAKOI
Payback Period 3,47 3,11 3,41 3,06
AARR 31,53% 38,86% 34,58% 42,37%
IRR 24,77% 27,41% 25,96% 28,77%
NPV $339.824 $251.918 $400.677 $292.311
PI 1,26 1,34 1,31 1,39

Some notes taken are:

• As expected, the lower increment rate on both market price (impact to revenue) and operating cost, will
decline / reduce the value of above methods.
• And vice versa, higher increment rate will lift up the figures. All the results remain unchanged (ie.
payback period Nakoi is shorter, AARR, IRR and PI of Nakoi are higher). Only Nakoi's NPV is lower, but
PI still exhibits higher profitability rate against investment.
• The recommendation remains go to NAKOI.

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13. Some parameters were revised by
Parker to adjust the capital budgeting
into the market.
c. Scenario growth of market price below cash cost at (i) 3% vs 4%, (ii) 4% vs 5%, and (iii) 3%
vs 5%, as shown below:
  Scenario 1 Scenario 2 Scenario 2
  DAKOTA NAKOI DAKOTA NAKOI DAKOTA NAKOI
Payback Period 3,5 3,15 3,46 3,12 3,52 3,18
AARR 30,40% 36,67% 31,86% 38,32% 29,22% 34,41%
IRR 24,31% 26,53% 24,90% 27,20% 23,83% 25,59%
NPV $317.108 $226.651 $346.409 $245.797 $293.715 $200.630
PI 1,24 1,3 1,27 1,33 1,23 1,27

Some notes taken are:

• Higher cost incremental will reduce operating profit, net profit and cash inflows. This takes down all the
result of capital budgeting methods,
• All scenarios still indicated the purchase of either Dakota or Nakoi still acceptable.
• NPV amount depends on high sales volume and low cost.
• The recommendation remains go to NAKOI.

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13. Some parameters were revised by
Parker to adjust the capital budgeting
into the market.
d. Yes, as explained above on the notes, that assumption or factor of growth rate will determine
the capital budgeting and investment decision-making with more appropriate and proper.