Angie Watts 1 Essay examples

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[Title Here, up to 12 Words, on One to Two Lines]Wheel Industries Consultant Report Argosy University Professor Charlie Merritt Financial Management | FIN401 A02 Company Information Wheel Industries is considering a three-year expansion project, Project A. The project requires an initial investment of $1.5 million. The project will use the straight-line depreciation method. The project has no salvage value. It is estimated that the project will generate additional revenues of $1.2 million per year before tax and has additional annual costs of $600,000. The Marginal Tax rate is 35%. Wheel has just paid a dividend of $2.50 per share. The dividends are…show more content…
WACC .30*3.25+.70*11.89= 9.298 rounded up 9.30% WACC: is a discount rate with minimum acceptable rate that determine if any project would be optimistic for NPV or not. Capital budgeting is the process of assessing the profits for future business projects especially when the funds are limited (Unknown, 2014). Capital budgeting is the process of assessing the profitability of future business projects, such as starting a new product or service line, in context of a business's resources and return requirements. This type of analysis is vital for small businesses, since choosing the right business opportunity (Cromwell, 2014). Under capital budgeting, you calculate the WACC for your business and the IRR for the project, and if the IRR is greater than the WACC, it is a profitable project you should pursue. Calculate the after tax cash flows for the project for each year. Explain the methods used in your calculations. Cash Flow per Year Revenue – Cost – Depreciation *1-Tax Rate + Depreciation = 1200000 -600000- 500000 * (1-.35) + 500000 = 565000 When using the Cash flow the calculation used is the indirect method and adding the non-cash expenditure to the net income. Therefore when non cash expenditure depreciates the project gets the cash flow. If the discount rate were 6 percent calculate the NPV of the project. Is this an

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