1 | Net Present Value | = | $ 55,020 | ||
2 | Simple rate of return | = | 11.8% | ||
3 - a. | Yes | ||||
34 - b. | No | ||||
1 | |||||
Year | Value Flows | Present Factor @17% | Present Value | ||
Initial Cost | 0 | $ -30,80,000 | 1 | $ -30,80,000 | |
Cash Inflows ($616000 + $364000) | 1 - 5 | $ 9,80,000 | 3.199 | $ 31,35,020 | |
Net Present Value | $ 55,020 | ||||
2 | Computation of Simple rate of return: | ||||
Simple rate of return | = | Net Profit / Investment | |||
= | $364000 / $3080000 | ||||
= | 11.8% | ||||
3 - a. | Yes | ||||
As the Net Present value is positive it is beneficial for company. | |||||
3 - b. | No | ||||
ROI | = | 20% | |||
Simple rate of return | = | 11.8% | |||
As, ROI is more than Simple rate of return. It is not recommended to accept the Investment opportunity. | |||||
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99 Check my work Derrick Iverson is a divisional manager for Holston Company. His annual pay...
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