# wgu paper

## wgu paper

Brandon Sisler

Net cash flow without depreciation
For year two
Expected annual sales \$3,200,000
Expected annual cost \$2,400,000
Depreciation expense \$0
Income before taxes \$600,000
Income at marginal rate \$168,000
Net Income
\$432,000
Net cash flow
\$432,000

*Depreciation affects cash flow by minimizing the
sum of money a company pays in taxes.
After calculating year two without deprecation we
come up with an annual cash flow of \$432,000.

When calculations with depreciation are included
we see an annual cash flow of \$534,900.

That leaves us with a difference of \$102,900

Net Preset Value
\$70,315
Based on the results of NPV, I recommend that
Entrepreneur D invest in the product.

Being that the NPV is at a positive number
investing in the project safe investment.

This means that cash inflow outweighs cash
outflow on a present value basis.

Internal Rate of Return
12.570%
Discount rate is at 12%

The entrepreneur should invest because the
product will repay capital cost incurred.

ARR VS: IRR

ARR

IRR

19.76%

12.570

Takes percentage of profit
into account.

Based on profits

Not time sensitive

Does not factor in percent
of profit
Based on current values of
cash inflows

PayBack Period
5 years 3 months

Very simple
Make quick
evaluation
Calculate fastest
return on investment
to recover money.

Focuses on short
term profitability
Possibility of
overlooking a good
investment
Time value of money
is ignored

PayBack

He wanted to payback his investment in eight
years and he will hit that in five years three
months. This means I would recommend
producing this product.

Weighted average cost of capital
and npv
WACC is a measure of the cost of each unit of
money related to time.
●WWCC for this product is 12%.