==================================================================================== FIN 419 Week 4 Team Assignment Problem Sets
· Initial capital cost = $ 3,500,000 Operating cash flow for each year = $ 1,000,000 Recovery of capital assets after five years = $ 250,000
The hurdle rate for this project is 12 %. If the initial cost of working capital is $ 500,000 for items such as teapots , teacups , saucers , and napkins , should Farbuck ’ s open this new shop if it will be in business for only five years ? What is the most it can invest in working capital and still have a positive net present value ?
Chapter 13 Problem 18
Working capital and capital budgeting . Working capital investment is 25 % of the anticipated first year sales for Wally ’ s Waffle House . The first-year sales are currently projected at $ 4,300,000 . The incremental cash flow ( not including working capital investment ) is
· Initial cash flow = $ 13,700,000 outflow Cash flow years 1 through 10 = $ 2,850,000
What is the internal rate of return of the ten-year project with working capital factored into the cash flow ? What is the net present value at a 15 % weighted average cost of capital ? What is the maximum investment in working capital for an acceptable project with a 15 % weighted average cost of capital ?)
==================================================================================== FIN 419 Week 4 Team Assignment Problem Sets
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