You need to evaluate the following Capital Budgeting proposal:The proposal involves renting space for the venture and requires delivery trucks and other assets. Up Front IssuesBuilding improvementsFleet of TrucksOther AssetsHiring and TrainingOther Tax-deductible expensesworking Capital CapitalizeCapitalizeCapitalizeExpenseExpense CostDepreciation(Time 0)Life Class200.0015540.007125.00330.00 -50.0015.00 Depreciation starts in period 1Projected operating profit before tax and depr (EBITDA) =Profit will grow for2years atthen at8%for5 120.0018%(to give you profit in years 2 and 3)years then at4% Tax rate28.0%Projected life10.00 yearsCost of Capital9.50%For Terminal Value assume you will shut down operations and take the cash.1.a.b.c.d.e. Compute theNPVIRRMIRRPaybackDiscounted Payback a.b. Make 2 Data TablesEvaluate the NPV as a function of the cost of capitalEvaluate the MIRR as a function of the cost of Building Improvements 2. ProjectedValue (End)0.0075.0015.00 3. Graph those tables 4. Do a Scenario Analysis with the following Scenarios:a. Base Case (as above) b. Optimistic CaseBuilding improvements:Fleet of TrucksOther AssetsInitial Profit grows at b. 25% ProjectedValue (End)-25.00100.0030.00for the first two years 10% ProjectedValue (End)-75.0050.000.00for the first two years Pessimistic CaseBuilding improvements:Fleet of TrucksOther AssetsInitial Profit grows at other assets.MACRS Depreciation Table (Improvements are worthless at the end ofthe -project but you will need to restore thebuilding – Restoration expenses are taxdeductible) ive you profit in years 2 and 3)for the remainder. MACRS TLifYear123 333.33D.45 .81% 456789101112131415161718192021 7.41% 100.00% MACRS TableLife Class571020.00% 14.29% 10.002.00% 24.49% 18.00 .20% 17.49% 14.40 .52 .52%5.76% 12.49%8.93%8.92%8.93%4.46% 11.52%9.22%7.37%6.55%6.55%6.56%6.55%3.28% 155.00%9.50%8.55%7.70%6.93%6.23%5.90%5.90%5.91%5.90%5.91%5.90%5.91%5.90%5.91%2.95% 203.750%7.219%6.677% 6.177%5.713%5.285%4.888%4.522%4.462%4.461%4.462%4.461%4.462%4.461%4.462%4.461%4.462%4.461%4.462%4.461%2.231 0.00% 100.00% 100.00% 100.00% 100.00% Capital RationingSuppose you are in the Corporate Trasurers office and you need to help decide Which projects will be chosen for theupconing year. You have the following information:HINT: Choose the Simplex LP Solving Method unless Solver tells you that it found that the problem is non-linear.Then go to Options and UNCHECK the option that says “Ignore Integer Constraints.” 12345678910 ProjectNameBrazil 1Brazil 2PanamaSouth AfricaKuwaitIndia 1India 2VietnamSouth KoreaLithuaniaTotals DivisionAmericasAmericasAmericasAf/MidEstAf/MidEstAsiaAsiaAsiaAsiaEurope Cost$1 035.67$1 877.41$2 572.91$640.15$533.23$782.74$2 083.32$1 330.08$1 435.51$1 000.07 NPV$1 254.00$2 524.00$8 325.00$825.00$528.00$987.00$1 158.00$1 648.00$1 154.00$951.00 IRR12.900%5.900%7.200 .900 .300%5.800%8.800%6.100 .500 .000% 1. If the Capital Budget is $10 000.00 then compute the optimal set of projects. 2. Repeat the above if you can only take a maximum of 1 project from each Division. cts will be chosen for the e problem is non-linear. Choose1111111111 set of projects.
