Andiamo Company (AC) uses the following standards in its capital budgeting process: WACC = 10% Target Discounted Payback Period (DPBP)= 5 years Target Accounting Rate of Return (ARR) =15% Currently, AC is considering establishing a massive drip irrigation system for one of the company’s agribusiness divisions. The system’s initial cost and expected cash flows generated by this project are given in the table below. At the end of year eight, AC expects to sell the system and the resulting after-tax cash flow amount is included in the corresponding cash flow below. 1 5 Year Cash Flows 0
0—(-1,800,000.00
1—-550,000.00
2 —795,000.00
3—- 860,000.00
4—- 450,000.00
5—-300,000.00
6—- 240,000.00
7—– 200,000.00
As a consultant, please use the following capital budgeting techniques to prepare a table to summarize your results. Make sure to show your and provide comments if the project should be accepted or rejected and why. You can use Excel for your calculations, if you wish, but you need cut and paste the complete results into a Word document where your comments and summary table are included
1) Discounted Payback Period
2) Accounting Rate of Return
3) NPV
4) MIRR
5) PI
