Evaluate the efficiency of an investment

Assignment Help Financial Management

Reference no: EM133540466

Assignment:

Term definitions:

Discount Rate - Think of this number as the reduced amount of purchasing power your cash will have in the future. For example $100 today buys 10 hamburgers but will only buy one hamburger in 2060 when a hamburger is $85. The higher the number the less purchasing power your future money will have.

ROI (Return on Investment)- a performance measure used to evaluate the efficiency of an investment or compare the efficiency of several investments.

NPV (Net Present Value) - the difference between the present value of cash inflows and the present value of cash outflows over a period of time. NPV is used in budgeting and investment planning to analyze the profitability of a projected investment or project. NPV is the result of calculations used to find today's value of a future stream of payments.

Instructions

The company you work for wants to buy an expensive intrusion detection system that will protect its network. It is very expensive but provides excellent security defenses. These defenses will save the company money. The system is expected to have a 6 or 7 year lifetime.

The accounting department estimates that the product will cost $110,000 to purchase and it will cost around $33,000 each year to maintain.

The department also calculates that it will produce a $42,000 benefit the first year they have it and then it will produce a benefit of $65,000 each year after that.

Modify the spreadsheet to calculate the return on an investment and identify the payback year based on a discount rate of 10%.

When is the payback year?

What is the ROI?

What is the NPV?

Reference no: EM133540466

Questions Cloud

Concept of the shared responsibility model srm : Which is the base concept of the shared responsibility model SRM?

Role of information systems in the data mining process : Information systems serve as a fundamental framework that enables organizations to effectively undertake the data mining process.

Explain performing backups : Explain why performing backups and having the ability to restore files is an essential skill for cybersecurity professionals.

Which would be the correct prefix for this subnet : You have been tasked with creating a subnet with at least 400 addreses. Which would be the correct prefix for this subnet?

Evaluate the efficiency of an investment : ROI (Return on Investment)- a performance measure used to evaluate the efficiency of an investment or compare the efficiency of several investments.

Analyse network operating systems integration : Analyse network operating systems integration and authentication methods according to network authentication model.

Describe the transmission control protocol : Describe the differences between Transmission Control Protocol (TCP) and User Datagram Protocol (UDP). Why would you use one over the other?

Should ransomware victims pay the ransom : Should ransomware victims pay the ransom or seek other solutions? Why?

What is meant by the term preparedness : What is meant by the term "preparedness"? Provide examples and supporting discussion.

User Account

All Pages