A company is planning a new investment and 116,000â‚¬ is the amount that is required to be paid for starting this investment, while the investment is expected to have five years useful life. Depreciation is expensed on a straight-line basis (meaning the same amount is expensed in each period over the assetâ€™s useful life). The residual value is â‚¬ 2,000 (resale value after depreciation is complete at the end of its useful life of the investment). Net sales revenue is 40,000 for the first year and then is expected to increase progressively by 10% (compared to the previous year). Cost of goods sold (depreciation is not included) are equal to 35% of the net revenues from sales but is expected to decrease continuously by a learning rate of 5% from the second year (thus: 35% – 5%) till the end of the investment. The selling, general and administrative (SGA) expenses of the company (which is actually running some other investments too) are expected to decrease by 3,000â‚¬ per year. This decline is solely due to the new investment and will be related to the decision of running this investment or not. Last, the tax rate is 29%. Using this information, you are required to: a. Calculate the investmentâ€™s cash flows throughout its five-year-period and its Net Present Value at 15% discount rate. (Assume rounding and no decimal points at euro amounts). Should the company make this investment? b. Calculate the investmentâ€™s Internal Rate of Return (Assuming two decimal points). Now, should the company make this investment? c. Evaluate the investment with Simple payback evaluation technique if the acceptable payback period for the investment is four years. (Assuming three decimal points). Should the company run this investment?
15% off for this assignment.
Our Prices Start at $11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!
Information about customers is confidential and never disclosed to third parties.
No missed deadlines – 97% of assignments are completed in time.
We complete all papers from scratch. You can get a plagiarism report.
If you are convinced that our writer has not followed your requirements, feel free to ask for a refund.
Terms And Conditions
Become A Writer
How Our Service is Used:
Our essays are NOT intended to be forwarded as finalized work as it is only strictly meant to be used for research and study purposes. We do not endorse or condone any type of plagiarism.