Question

Answer. Show Work a1)-Empire Iidustries is considering ading a new product (Produset 1 to ats limeup Thie dsct ie expected to generate sales for four years after which time the proddact wil be Investment |? ment Year Income from Cash Flow Operations Product N $600 1$10 100 2110 3 210 300 310 400 a) Compute the cash payback period (average accounting return). b) Assuming no estimated residual value, compute the AAR ( c) Compute the Compute the Net Present Value using a discount rate of :2 expect the IRR to less tha n, equal to, or greater than 20%? d) Would you oposal? Why or Why not? e) Would you consider investing in this pr

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NPV, IRR, PBP,OCF,INDEX Microsoft Excel Home nert Page Layout Formulas Data Review View dd-Ins Cut Σ AutoSum ー E " ゴWrap Text aCopy B า 프 . Ej-., Δ. : r_一 逻锂函Merge & Center. $, % , 弼,8 conditional Format . Cell Insert Delete Format Sort &Find & 2 ClearFe Select Edting Format Painter Formatting, as Table w styles. ▼ ㆆ ▼ Clipboard Alignment Number Cells N74 74 75 76 INVESTMENT YEAR INCO OPERATIONS ME FROM CASH FLOW CUMULATIVE CFAT 78 PRODUCT N 79 80 81 82 83 84 85 86 87 100 300 10 110 210 310 100 200 200 4 900 CASH PAYBACK PERIOD = 3 + (INVESTMENT-CCFAT3)/CFAT 4 CASH PAYBACK PERIOD = 3 + (600-500)/400 CASH PAYBACK PERIOD = ANS 1 3.25 YEARS AVERAGE ACCOUNTING RETURN = AVERAGE NET INCOME/INVESTMENT*100 AVERAGE NET INCOME = TOTAL INCOME/4 = (10+1 10+210+310)/4-160 ANS 2 89 90 91 92 il 1 r-NPv OCF, FCF VALUATION ! İNDEX 1 CURRENCY AVERAGE ACCOUNTING RETURN-160/600*100-26.67% | LOAN . CROSS OVER COMPARE / HEDGING MONEY MARKET . GM- 09-05-2018

NPV, IRR, PBP,OCF,INDEX Microsoft Excel Home nert Page Layout Formulas Data Review View dd-Ins Cut E AutoSum ー E " ゴWrap Text ta copy." в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting as Table Styles2 Clear Sort &Find & Format Painter Clipboard Alignment Number Cells Edting N110 92 93 94 95 96 97 98 ANS 3 YEARCFAT PV FACTOR@ 20% PV OF CFAT 0 100 200 200 0.8333 0.6944 0.5787 0.4823 83.33 138.89 115.74 192.90 -69.14 4 NPV = 100 101 102 103 104 105 106 107 108 109 110 il 1 r-NPv OCF, FCF VALUATION ! İNDEX 1 CURRENCY ANS 4 AS NPV IS NEGATIVE AT 20%, IRR HAS TO LOWER THAN 20% ANS 5 AS NPV IS NEGATIVE, WE SHOULD NOT INVEST IN THIS PROPOSAL | LOAN . CROSS OVER COMPARE / HEDGING MONEY MARKET . GM- 09-05-2018