15%

8,000,000

sales 2013

assets (end of 2012)

assert growth per year

current liabilities
accounts payable
Consolidation Entries
Debi Cred
t it

Cash 149,400 11
1,000
Receivable 156,000 15
s and 2,000
Inventory
Property, 2, 47
Plant and 8,000 A
Equipment
Assuming a payback period of 2.5 years project
B should be undertaken because it will be paid
in a year and a half while project a should be
rejected even though both have positive NPV
and IRRs over the cost of capital because it
C fails the payback period criteria

Cost of capital 5%
$18,243,813.0
D NPV 2
IRR 27%

If the cost of capital is 5% while both projects would be accaptable

because both NPVS are positive and because both IRRs are over
 the cost of capital, project A should be accepted because it has the
higher NPV and will maximize value

$ $
$ 20,000,00 15,000,00
1 5,000,000 0 0
$
$ 10,000,00
2 10,000,000 0 0
$
3 (7,000,000)
$
4 (14,000,000)

13.53%

G MIRR

180,000
Investment 1,192,000
in Seguros

Research &
Developme A
nt
Goodwill
A
Trademark 372,000 22
3,000 A
Total 4,049,400 96
Assets 4,000
 (A)

(A) 18
4,000
(S)
(A)

(A) 12
9,000
(A) 9
7,000
(A) 5
4,600

notes payable
accrurals

after tax profit margin

payout ratio

Additional Funds Needed = Increase in Assets - Increase in Spontaneous Liabilities - Increase in Retained Earnin

AFN= (previous year assets)*sales growth rate- (last year liabillites*sales growth- sales of this year * after tax profit margin
The AFN in problem 2 is higher than the one found in problem 1 for several reasons. First, from a mathmatical presepectiv
funds than before becasue the requoired increase in assets that the comapny needs increased by 2,000,000 dollars. This