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Capital Budgeting Methods

Capital Budgeting Methods. Agribusiness Finance LESE 306 Fall 2009. Page 67 in booklet. Page 67-68 in booklet. Page 68 in booklet. Present Value Interest Factor (PIF) Table. PIF r,n = (1 + r) -n. Page 68 in booklet. NPV > 0 suggests project is economically feasible

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Capital Budgeting Methods

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  1. Capital Budgeting Methods Agribusiness Finance LESE 306 Fall 2009

  2. Page 67 in booklet

  3. Page 67-68 in booklet

  4. Page 68 in booklet

  5. Present Value Interest Factor (PIF) Table PIFr,n = (1 + r) -n

  6. Page 68 in booklet

  7. NPV > 0 suggests project is economically feasible NPV = 0 suggests indifference NPV < 0 suggests project is economically infeasible Page 69 in booklet

  8. Page 69 in booklet Discount rate = 5%

  9. Present Value Interest Factor (PIF) Table PIFr,n = (1 + r) -n

  10. Page 70 in booklet

  11. Equal Payment Present Value Interest Factor (EPIF) Table EPIFr,n = [1 – (1 / (1+ r)n)] / r

  12. Pages 70-71 in booklet

  13. Page 71 in booklet

  14. Page 71 in booklet

  15. Equal Payment Present Value Interest Factor (EPIF) Table EPIFr,n = [1 – (1 / (1+ r)n)] / r

  16. Page 71-72 in booklet

  17. Page 72 in booklet

  18. Page 73 in booklet

  19. Page 74 in booklet

  20. I will come back to this table when we cover pro forma analysis and how to project the values in this table required in investment analysis. Page 74 in booklet

  21. Page 74 in booklet

  22. Page 77 in booklet

  23. Page 78 in booklet

  24. Page 79 in booklet

  25. Pages 79-80 in booklet

  26. Page 80 in booklet

  27. Set NPV equal to zero and solve for T, the terminal value. Page 80 in booklet

  28. Page 82 in booklet

  29. G is the expected rate of appreciation Page 82 in booklet

  30. Page 83 in booklet

  31. Page 83 in booklet

  32. Equal net cash flows Page 83 in booklet

  33. Equal net cash flows Capital gains tax rate is 25% Page 83 in booklet

  34. Comparable land values Equal net cash flows Capital gains tax rate is 25% Page 83 in booklet

  35. Comparable land values Equal net cash flows Capital gains tax rate is 25% 7% land value appreciation rate Page 83 in booklet

  36. Comparable land values Equal net cash flows Capital gains tax rate is 25% 7% land value appreciation rate 5% discount rate Page 83 in booklet

  37. Comparable land values Equal net cash flows 20 year economic life Capital gains tax rate is 25% 7% land value appreciation rate 5% discount rate Page 83 in booklet

  38. Page 83 in booklet

  39. Page 83 in booklet

  40. Page 83 in booklet

  41. Page 83 in booklet

  42. Page 84 in booklet

  43. Page 84 in booklet

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