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all the excel problems should be pasted in word only with the formulas used.

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all the excel problems should be pasted in word only with the formulas used.
Answered Same Day May 02, 2020

Solution

Pulkit answered on May 06 2020
137 Votes
Part – A (Solution)
    Statement Showing Net Cash Flows for the First Year of Production
    Particulars
    
    
    Bathurst
    Wodonga
    Sales Revenue
     AUD 30,000,000.00
     AUD 30,000,000.00
    Cost of Production
     AUD 27,500,000.00
     AUD 27,500,000.00
    Gross Profit
     AUD 2,500,000.00
     AUD 2,500,000.00
     
     
     
    Rebate from Municipal taxes
     AUD 500,000.00
     AUD -
    Grant from NSW State government
     AUD 250,000.00
     AUD -
    Market research cost
     AUD (250,000.00)
     AUD (250,000.00)
    Depreciation
     AUD (320,000.00)
     AUD (600,000.00)
    Net Profit before Tax
     AUD 2,680,000.00
     AUD 1,650,000.00
    Tax Rate
    30.00%
    30.00%
    Net Profit After Tax
     AUD 804,000.00
     AUD 495,000.00
    Add:
     
     
    Depreciation
     AUD 320,000.00
     AUD 600,000.00
    Net Cash Flow after tax
     AUD 1,124,000.00
     AUD 1,095,000.00
    Statement Showing Calculation of Payback Period
    
    
    
    
    Particulars
    Bathurst
    Wodonga
    Initial Investment/ Capital Cost
     AUD 8,000,000.00
     AUD 6,000,000.00
    Net Cash Flow after tax
     AUD 1,124,000.00
     AUD 1,095,000.00
    Payback Period(In years)*
    7.12
    5.48
    *Working Note
    
    
    Payback Period =
    Initial Investment/Cash flow per period
    Statement showing Net Present Value of the Project
    
    
    
    
    Particulars
    Bathurst
    Wodonga
    Initial Investment
     AUD 8,000,000.00
     AUD 6,000,000.00
    CPVF@ 22% p.a.for 10 years
    3.9232
    3.9232
    Annual Cash inflow after tax
     AUD 1,124,000.00
     AUD 1,095,000.00
    Yea
    10
    10
    Present Value of Total cash inflows
     AUD 44,096,768
     AUD 42,959,040
    Net Present Value
     AUD 36,096,768.00
     AUD 36,959,040.00
    Statement showing Profitability Index of the Project
    
    Particulars
    Bathurst
    Wodonga
    Net Present Value
     AUD 36,096,768.00
     AUD 36,959,040.00
    Initial Investment
     AUD 8,000,000.00
     AUD 6,000,000.00
    Profitability Index*
    4.512096
    6.15984
    *Working Note
    
    Profitability Index =
    Net Present Value/ Initial Investment
While applying the different capital budgeting techniques’ to the options in the case study it can be concluded that the result of each of the capital budgeting technique used provide the same result that to accept the option 2 which is to continue the production in the existing vacant factory space at the Wodonga head office site instead of starting the production in the new location. But the result is vague because it is only given the second option full time employment for an additional 20 staff to be recruited and rather it is not given in the question that what is the salary of the staff recruited in the Wodonga head office site. And if the salary of these employees is considered in the calculation it may affect the decision to accept the option.
Cannibalization of product in the capital budgeting means the...
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