Purpose of Assignment
The purpose of this assignment is for students to employ capital budgeting techniques using time value of money concepts to determine the acceptability of large dollar value assets.
Scenario: A firm has potential project to consider that has projected free cash flows of $575,000 for Year 1, $625,000 for Year 2, and 750,000 for Year 3. The projected terminal value at the end of Year 3 is $8,000,000. The firm’s Weighted Average cost of Capital (WACC) is 12.5%.
If the initial investment required in year one is $7,000,000.
Would you recommend accepting the investment?
Create a MicrosoftÂ® ExcelÂ® document addressing the following:
- Determine the Discounted Cash Flow (DCF) value of the firm.
- Recommend acceptance of this project using net present value criteria.
- Display your calculations.
Format assignment consistent with APA guidelines.