Calculate the NPV for the Following Capital Budgeting Proposal: $100,000

question 15

Essay

Calculate the NPV for the following capital budgeting proposal: $100,000 initial cost, to be depreciated straight-line over five years to an expected salvage value of $5,000, 35 percent tax rate, $45,000 additional annual revenues, $15,000 additional annual expense, $8,000 additional investment in working capital, 11 percent cost of capital.
$\begin{array}{|l|r|r|r|r|r|r|}\hline & {\text { Year 0 }} & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } & \text { Year 5 } \\\hline \text { Cost } & -100,000 & & & & & \\\hline \text { Change in Working } & -8,000 & & & & & 8,000 \\\hline \text { Capital } & & & & & & \\\hline \text { Revenues } & 45,000 & 45,000 & 45,000 & 45,000 & 45,000 & \\\hline \text { - Expenses } & -15,000 & -15,000 & -15,000 & -15,000 & -15,000 & \\\hline \text { - Dep } & & -19,000 & -19,000 & -19,000 & -19,000 & -19,000 \\\hline \text { = Pretax Profit } & & 11,000 & 11,000 & 11,000 & 11,000 & 11,000 \\\hline \text { Taxes } & & 3,850 & 3,850 & 3,850 & 3,850 & 3,850 \\\hline \text { Profit } & & 7,150 & 7,150 & 7,150 & 7,150 & 7,150 \\\hline \text { Salvage Value } & & & & & & 5,000 \\\hline \text { Tax effect } & & & & & 0 & 5,000 \\\hline \text { Cash Flows } & -108,000 & 26,150 & 26,150 & 26,150 & 26,150 & 39,150\\\hline\end{array}$

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Definitions:

Emotional Intelligence

The ability to recognize, understand, and manage our own emotions and those of others, facilitating enhanced communication and interpersonal effectiveness.

Affective and Cognitive

Pertaining to the emotions and mental processes involved in how people perceive and react to the world around them.

Emotional Intelligence's Impact

Refers to how the ability to understand and manage emotions enhances leadership effectiveness and organizational dynamics.

Trait Approach

A theory in leadership studies that assumes leaders possess certain inherent traits that make them effective.