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1 | Net Present Value | = | $ 1,63,100 | ||
2 | IRR | = | 20% | ||
3 | Simple rate of return | = | 13.6% | ||
4 - a. | Yes | ||||
4 - b. | No | ||||
1 | |||||
Year | Value Flows | Present Factor @19% | Present Value | ||
Initial Cost | 0 | $ -58,00,000 | 1 | $ -58,00,000 | |
Cash Inflows ($790000 + $1160000) | 1 - 5 | $ 19,50,000 | 3.058 | $ 59,63,100 | |
Net Present Value | $ 1,63,100 | ||||
2 | Computation of IRR | ||||
Year | Value Flows | ||||
0 | $ -58,00,000 | ||||
1 | $ 19,50,000 | ||||
2 | $ 19,50,000 | ||||
3 | $ 19,50,000 | ||||
4 | $ 19,50,000 | ||||
5 | $ 19,50,000 | ||||
IRR | = | 20% | |||
3 | Computation of Simple rate of return: | ||||
Simple rate of return | = | Net Profit / Investment | |||
= | $790000 / $5800000 | ||||
= | 13.6% | ||||
4 - a. | Yes | ||||
As the Net Present value is positive it is beneficial for company. | |||||
4 - b. | No | ||||
ROI | = | 23% | |||
Simple rate of return | = | 13.6% | |||
As, ROI is more than Simple rate of return. It is not recommended to accept the Investment opportunity. |
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Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determinded by his division's return on investment (ROI), which has been above 22% each of the last three years. We were unable to transcribe this imageCasey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 22% each of the last three years. Casey is considering a capital budgeting...
Saved Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 24% each of the last three years. Casey is considering a capital budgeting project that would require a $4,300,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 20%. The project would provide net operating income each year for five years as...
Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 24% each of the last three years. Casey is considering a capital budgeting project that would require a $4,300,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 20%. The project would provide net operating income each year for five years as follows:...
Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 23% each of the last three years. Casey is considering a capital budgeting project that would require a $4,100,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 19%. The project would provide net operating income each year for five years as follows:...