Net operating income | 440000 | ||||
Add: Depreciation | 800000 | ||||
Net annual cash flows | 1240000 | ||||
1 | |||||
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
Net annual cash flows | 1240000 | 1240000 | 1240000 | 1240000 | 1240000 |
X PV factor @ 16% | 0.862 | 0.743 | 0.641 | 0.552 | 0.476 |
Present value of Net annual cash flows | 1068880 | 921320 | 794840 | 684480 | 590240 |
Total present value | 4059760 | ||||
Less: Investment cost | 4000000 | ||||
Net present value | 59760 | ||||
2 | |||||
Simple rate of return = Net operating income/Investment cost | |||||
Simple rate of return = 440000/4000000= 11% | |||||
3a | |||||
Yes the company would want Derrick to pursue to this investment opportunity | |||||
3b | |||||
No, Derrick would not be inclined to pursue to this investment opportunity as his ROI will decrease |
Exercise 13-9 Net Present Value Analysis and Simple Rate of Return [LO13-2, LO13-6] Derrick Iverson is...
Exercise 13-9 Net Present Value Analysis and Simple Rate of Return [LO13-2, LO13-6] Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $4,450,000 investment in equipment with a useful life of five years and no salvage value. Holston Company’s discount rate is 18%. The...
Exercise 14-9 (Algo) Net Present Value Analysis and Simple Rate of Return [LO14-2, LO14-6]Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $3,700,000 investment in equipment with a useful life of five years and no salvage value. Holston Company’s discount rate is 16%. The...
Hos De purchased? the company requires a simple EXERCISE 13-9 Net Pres Derrick Iverson is a divi determined by his divi last three years. Derrick: investment in equipme ny's discount rate years as follows: Net Present Value Analysis and Simple Rate of Return (L013-2, L013-6) is a divisional manager for Holston Company. His annual pay raises are largely his division's return on investment (ROI), which has been above 20% each of the Derrick is considering a capital budgeting project that...
Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $4,200,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 18%. The project would provide net operating income each year for five years as follows:...
Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $3,050,000 investment in equipment with a useful life of five years and no salvage value. Holston Company’s discount rate is 16%. The project would provide net operating income each year for five years as follows:...
Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $3,000,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 15%. The project would provide net operating income each year for five years as follows:...
99 Check my work Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $3,080,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 17%. The project would provide net operating income each year for...
Homework #12 -Chapter #13 i Submit Saved Help Save & Exit Check my work Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $3,300,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 17%....
2 Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $3,800,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 16%. The project would provide net operating income each year for five years as...
PROBLEM 13-17 Net Present Value Analysis; Internal Rate of Return; Simple Rate of Return [LO13-2, LO13-3, L013-6] Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely deter- mined by his division's return on investment (ROI), which has been above 20% each of the last three years. Casey is considering a capital budgeting project that would require a $3,500,000 invest- ment in equipment with a useful life of five years and no salvage value, Pigeon...