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    Capital Budgeting Criteria

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    Nicole Labbao
    The document contains capital budgeting analyses for two projects - one from GMA Network and one from ABS-CBN Corporation. It provides the net present value, internal rate of return, profitability index, payback period and conclusion for each project. The ABS-CBN Corporation project has a higher net present value of $2,494 compared to $1,029.13 for the GMA Network project. Both projects meet the required rate of return of 11% and have a profitability index greater than 1, indicating both projects should be accepted.

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    Capital Budgeting Criteria

    Uploaded by

    Nicole Labbao
    40 views3 pages
    The document contains capital budgeting analyses for two projects - one from GMA Network and one from ABS-CBN Corporation. It provides the net present value, internal rate of return, profitability index, payback period and conclusion for each project. The ABS-CBN Corporation project has a higher net present value of $2,494 compared to $1,029.13 for the GMA Network project. Both projects meet the required rate of return of 11% and have a profitability index greater than 1, indicating both projects should be accepted.

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    Capital Budgeting Criteria

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    The document contains capital budgeting analyses for two projects - one from GMA Network and one from ABS-CBN Corporation. It provides the net present value, internal rate of return, profitability index, payback period and conclusion for each project. The ABS-CBN Corporation project has a higher net present value of $2,494 compared to $1,029.13 for the GMA Network project. Both projects meet the required rate of return of 11% and have a profitability index greater than 1, indicating both projects should be accepted.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    40 views3 pages

    Capital Budgeting Criteria

    Uploaded by

    Nicole Labbao
    The document contains capital budgeting analyses for two projects - one from GMA Network and one from ABS-CBN Corporation. It provides the net present value, internal rate of return, profitability index, payback period and conclusion for each project. The ABS-CBN Corporation project has a higher net present value of $2,494 compared to $1,029.13 for the GMA Network project. Both projects meet the required rate of return of 11% and have a profitability index greater than 1, indicating both projects should be accepted.

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    You are on page 1of 3

    GMA Network (2013)

    Capital Budgeting Criteria

    Free Cash Flow (FCF) = 2,370.35

    Initial Outlay (I.O.) = 8,825.07

    Required Rate of Return (RRR) = 7%

    Free Cash Flow Present Value Discounted


    Year Present Value (PV)
    (FCF) Factor (PVIF) Cash Flow
    (CDFCF)
    0 (8,825.07) 1 (8,825.07) (8,825.07)
    1 2,370.35 .935 2,216.28 -6,608.79
    2 3,423.51 .873 2,988.72 -3,620.07
    3 1,973.01 .816 1,609.98 -2,010.09
    4 2,914.42 .763 2,223.70 213.61
    5 1,143.78 .713 815.52 1,029.13
    Total = 9,854.2

    Present Value (PV) Initial Outlay (I.O.) = Net Present Value (NPV)

    9,954 8,825.07 =1, 029.13

    Net Present Value (NPV) = 1, 029.13

    Payback 3yrs

    2,010.09
    =
    3+ =3.903 yrs 4 yrs
    2,223.70

    Internal Rate of Return (IRR) = 11% = Accept

    Year Free Cash Flow Present Value Present Value (PV)


    (FCF) Factor (PVIF)
    0 (8,825.07) 1 (8,825.07)
    1 2,370.35 .901 2,135.69
    2 3,423.51 .812 2,779.89
    3 1,973.01 .731 1,442.27
    4 2,914.42 .759 1,920.60
    5 1,143.78 .593 678.26
    Total = 8,956.71
    PV 8,956.71
    Profitability Index ( P . I . )= = =1.01 Greater than one 1.0 accept
    I . O. 8,825

    ABS-CBN Corporation (2013)

    Capital Budgeting Criteria

    Free Cash Flow (FCF) = 8,000

    Initial Outlay (I.O.) = 25,123

    Required Rate of Return (RRR) = 7%

    Free Cash Flow Present Value Discounted


    Year Present Value (PV)
    (FCF) Factor (PVIF) Cash Flow
    (CDFCF)
    0 (25,123) 1 (25,123) (25,123)
    1 8,000 .935 7,480 -17,643
    2 10,000 .873 8,730 -8,913
    3 4,000 .816 3,264 -5,649
    4 6,000 .763 4,578 -1,071
    5 5,000 .713 3,565 2,494
    Total = 27,617

    Present Value (PV) Initial Outlay (I.O.) = Net Present Value (NPV)

    27,617 25,123 = 2,494

    Net Present Value (NPV) = 2,494

    Payback 4yrs

    1.071
    =
    4+ =4.3 yrs
    3 .565

    Internal Rate of Return (IRR) = 11% = Accept

    Year Free Cash Flow Present Value Present Value (PV)


    (FCF) Factor (PVIF)
    0 (25,123) 1 (25,123)
    1 8,000 .901 7,480
    2 10,000 .812 8,730
    3 4,000 .731 3,264
    4 6,000 .659 4,578
    5 5,000 .593 3,565
    Total = 27,617
    PV 25,171
    Profitability Index ( P . I . )= = =1.0 0 Accept
    I . O. 25,123

    Decision
    ABS-CBN
    GMA Network Conclusion
    Corporation
    Net Present Value
    2,494 1,029.13
    (NVP)
    Internal Rate of
    11% 11%
    Return (IRR)
    Profitability Index
    1.00 1.01
    (P.I.)
    Payback 4.3 3.9

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