# Capital Budgeting-Asset Replacement Assignment (Math Problem Sample)

The Conch Republic Electronics mini-case will allow you to apply the cash flow models for evaluating capital decisions. You are in the role of a recent MBA graduate and have the ability to apply what you learn this week to a “real life” simulation.

Upon Completion of this mini-case, you will demonstrate your ability to:

•Apply the calculations for payback analysis of a capital project.

•Apply the calculations for profitability analysis of a capital project.

•Apply the calculations for a NPV analysis of a capital project.

•Apply the calculations for a IRR analysis of a capital project.

•Make an appropriate recommendation based on the facts presented

Case Study:

After you have completed the readings for chapter 10, you should be ready to complete this assignment. Return to the case study on p.341-342 of the text and reread it carefully. As you are thinking about your response, please remember that one thing about cases – usually the quick answer is not the correct one. You need to be able to decide what the issues at hand are and what information is really critical to giving the correct advice.

Use the questions at the end of the case for guidance, but remember you may add to your explanations. One thing that student’s tend to do with a case is bring in more information than what is needed – stick to the facts as presented in the case and the chapter readings.

Please prepare and submit a 1-3 page response including synthesis of chapter readings and applications to corporate organizational structure.

To receive full credit, for Mini-cases:

You are to answer the questions that are found at the end of each case in your textbook as clearly and succinctly as possible. You will be graded on the accuracy of your answers and the application of the proper support from text/class material. Please show any and all computations required since partial credit will be given for your work (when work is shown).even if the final answer is incorrect

Capital Budgeting-Asset Replacement Assignment

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Date of Submission

Capital Budgeting- Asset Replacement Assignment

Incremental Initial Capital Outlay

Description

Cash price for new asset acquisition

Installation costs

Incremental net working capital (see working 1)

TOTAL

Amount $

35, 500,000

750,000

34,864,000

71,114,000

Incremental Savings/Benefits

Description

Year 1. 480x 74,000units- 310x 80,000 units

Year 2. 480x 95,000 units- 310 x 60,000 units

Year 3.480x 125,000 units

Year 4.480x 105,000 units

Year 5. 480x 80,000 units

TOTAL

Less Decremented benefits

Year 1. 80,000 units x 35

Year 2. 60,000 units x 35

Year 1& 2. 15,000 units x 310 x2

14,200,00

TOTAL INCREAMENTAL BENEFITS

Amount $

10, 720,000

29,000,000

60,000,000

50,400,000

38,400,000

188,520,000

(14, 200,000)

174, 320, 000

Incremental Operating Costs

Description

Year 1. 185x 74,000 units - 125x 80,000 units

Year 2. 185x 95,000 units- 125x 60,000 units

Year 3. 18...

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