Computation of net present value and return on investment

Reference no: EM1314233

Perform a financial analysis for a project using the format provided .Assume the projected costs and benefits for this project are spread over four years as follows: Estimated costs are $100,000 in Year 1 and $25,000 each year in Years 2,3, and 4. Estimated benefits for $0 in Year 1 and $80,000 each year in Years 2,3, and 4. Use an 8 percent discount rate. (Create a template like the attachment or use the template; however, just remember to use the numbers given in the assignment) to calculate and clearly display the NPV, ROI, and year in which payback occurs. In addition, write a paragraph explaining whether you would recommend investing in this project, based on your financial analysis.

Financial Analysis for Project Name

Discount rate

Assume the project is completed in Year 0

Year

Total

Costs

100

Discount factor

1.00

0.93

0.86

0.79

Discounted costs

100

358

Benefits

200

Discount factor

1.00

0.93

0.86

0.79

Discounted benefits

185

171

159

515

Discounted benefits - costs

(100)

158

NPV

Cumulative benefits - costs

(100)

(7)

158

ROI

44%

Payback before Year X

Assumptions

Reference no: EM1314233

Questions Cloud

Explain questions on investments and transfer pricing : Explain questions on investments and transfer pricing and capital budgeting and One criticism of the payback method is that it ignores cash flows that occur after the payback point has been reached

Preparation of multi-step income statement : Preparation of Multi-step Income statement - Using the information provided, prepare a multi-step income statement for the year ended December 31, 2009 in proper format including earnings per share disclosure.

Closing entries and statement of retained earnings : Preparation of closing entries and statement of retained earnings - Prepare a Statement of Retained Earnings for the year ended December 31, 2009 in proper format.

Preparation of income statement and balance sheet : Preparation of Income statement and Balance Sheet and Financial Data for 2008 Based on an aging of the accounts receivable, it was determined that the allowance for bad debts at 12/31/08 should be $1,100.

Computation of net present value and return on investment : Computation of net present value and return on investment and Create a template like the attachment or use the template however just remember to use the numbers given in the assignment

Evaluate internal rate of return method : In the payback method, depreciation is added back to net operating income when computing the net annual cash flows and net present value method and the internal rate of return method can be used as a screening tool in capital budgeting decisions.

Transformation of exponential model functions : Solving the transformation of exponential model functions.

Describe decision making based on npv of capital project : Describe Decision making based on NPV of capital project and calculate the present value of the salary differential for completing the certification pro-gram

How many ounces of plastic resin should mate plan : How many ounces of plastic resin should Mate plan on purchasing during the month of October - Mate Boomerang Corporation manufactures and sells plastic boomerangs

User Account

All Pages