What are the variety of capital budgeting tools including net present value (NPV), internal rate of...

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Finance

What are the variety of capital budgeting tools including netpresent value (NPV), internal rate of return (IRR), payback period,and profitability index (PI). Only evaluate the incremental changesto cash flows.
Use an Excel spreadsheet showing the required cash flowforecasts and capital budgeting tool calculations.
Major Equipment Purchase
A new major equipment purchase, which will cost $10 million;however, it is projected to reduce cost of sales by 5% per year for8 years.
The equipment is projected to be sold for salvage valueestimated to be $500,000 at the end of year 8.
Being a relatively safe investment, the required rate of returnof the project is 8%.
The equipment will be depreciated at a MACRS 7-yearschedule.
Annual sales for year 1 are projected at $20 million and shouldstay the same per year for 8 years.
Before this project, cost of sales has been 60%.
The marginal corporate tax rate is presumed to be 25%.

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Cost savings 560SalesTax shield DepreciationTax rateThe incremental and cumulative cash flows See Answer

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What are the variety of capital budgeting tools including netpresent value (NPV), internal rate of return (IRR), payback period,and profitability index (PI). Only evaluate the incremental changesto cash flows.Use an Excel spreadsheet showing the required cash flowforecasts and capital budgeting tool calculations.Major Equipment PurchaseA new major equipment purchase, which will cost $10 million;however, it is projected to reduce cost of sales by 5% per year for8 years.The equipment is projected to be sold for salvage valueestimated to be $500,000 at the end of year 8.Being a relatively safe investment, the required rate of returnof the project is 8%.The equipment will be depreciated at a MACRS 7-yearschedule.Annual sales for year 1 are projected at $20 million and shouldstay the same per year for 8 years.Before this project, cost of sales has been 60%.The marginal corporate tax rate is presumed to be 25%.