Question

Question 1 The management at Mike's Camping Supply would like to invest in a new roject that will generate $50,000 of income for the first three years and $70,000 for the seven vears afterwards. The cost of the project in $300,000 buy in and will have a residual value of $15,000. Calculate th average rate of return for the project. cludes a Question 2 If a capital investment proposal meets the net Question 3 present value and internal rate of returm standard, what dos management analze nexr Assume that a manager is reviewing a rejected capial investment proposal and the qualitative considerations that the company should include. If the qualitative considerations do change the decision, what should management do next? Question 4 After accepting a number of proposals, what is the next step that management should consider and perform an analysis of?

Answer 1

Q1.
Initial Investment			300000
Salvage value			15000
Average Investment			157500
Average Income			$64,000
(50000*3+70000*7)
Average rate of return: Average Income / Average Investment *100
		64000 / 157500 *100= 40.63%