Expansion Project Scenario

In capital budgeting, the net investment and cash flows, along with the cost of capital, determine the net present value of the project and inform the investment decision. This discussion provides an opportunity for you to practice calculating an expansion project’s net investment (NINV) and annual cash flows (FCF).

For this discussion forum, refer to the Expansion Project PopFizz Soda Company Scenario Download Expansion Project PopFizz Soda Company Scenario. In your post (with a minimum of 300 words):

• Calculate the net investment of the project.
  • Provide your calculations in a table similar to the table in Section 9-8a of the text.
    • How Do I Insert a Table Using the Rich Content Editor?Links to an external site.
  • Calculate the annual cash flows of the project.
    • Provide your calculations in a table similar to Table 9-4 in Section 9-8b of the text.
  • Explain how your calculations would change if the company determined it had to invest $40,000 in inventory initially (less accounts payable to suppliers) and, for each year, the change in net working capital was equal to 50 percent of the change in revenues (i.e., the increase or decrease in revenues) for that year.
  • Explain how your calculations flows would change if the company believed the equipment would have a salvage value of $100,000 (pre-tax) rather than $0 in five years.
  • Describe an element of this problem that was challenging to you.
  • Ask at least one question about expansion project analysis and capital budgeting.