1 | Net Present Value | = | $ 80,365 | ||
2 | Simple rate of return | = | 11.7% | ||
3 - a. | Yes | ||||
34 - b. | No | ||||
1 | |||||
Year | Value Flows | Present Factor @17% | Present Value | ||
Initial Cost | 0 | $ -51,50,000 | 1 | $ -51,50,000 | |
Cash Inflows ($1030000 + $605000) | 1 - 5 | $ 16,35,000 | 3.199 | $ 52,30,365 | |
Net Present Value | $ 80,365 | ||||
2 | Computation of Simple rate of return: | ||||
Simple rate of return | = | Net Profit / Investment | |||
= | $605000 / $5150000 | ||||
= | 11.7% | ||||
3 - a. | Yes | ||||
As the Net Present value is positive it is beneficial for company. | |||||
3 - b. | No | ||||
ROI | = | 25% | |||
Simple rate of return | = | 11.7% | |||
As, ROI is more than Simple rate of return. It is not recommended to accept the Investment opportunity. | |||||
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