Capital budgeting provides financial decision makers with important perspectives and information. With tools such as present
and future values, perpetuities and annuities, and cash flows, capital budgeting can craft a detailed picture ofwhether an
investment will be worth the cost and effort.
For this week’s Assignment, you evaluate the following capital budgeting decision scenario.
Pizza Planet Co.
Pizza Planet Co. paid a consultant to study the desirability of installing some new equipment. The consultant submitted the
following analysis:
Cost of new equipment $50,000
Present value of after-tax revenues from operation $05,000
Present value of afte r-tax ope rating expenses $10,000
Present value of depreciation expenses $03,750
Consulting fees and expenses $375
The corporate tax rate is 0096. In a ‘I- to 2-page paper, explain whether Pizza Planet Co. should install the new equipment.
Justify your response with supportive examples and references.
