What is the pro?tability index-piggly-wiggly inc

Assignment Help Finance Basics
Reference no: EM133122816

Piggly-Wiggly Inc., owns a parcel of land that is not zoned for grocery store operations. The company is loathed to let the land stand idle and has come up with two possibilities for the use of the land that do satisfy zoning requirements - distribution. The company COULD develop the land and build a distribution center for its grocery store operations. Alternatively, the company could "build to suit" and create a distribution center that it leases to Amazon. The ?rst choice will require an initial investment of $11M immediately and is expected to improve after-tax cash flows by $1.9M each year over the 10-year life. The Amazon choice will require less initial investment, $3.8M in total, also immediately, and over the ten- year lease, the after-tax cash ?ow is forecast to be $700K each year.

a. If the risk adjusted discount rate for each project is 10.0%, what is the pro?tability index of each choice?

b. Can we use the pro?tability index to make our decision?

Reference no: EM133122816

Questions Cloud

How much goodwill was inherent in the purchase of little : During 2022 Little reported earnings of $80,000 and paid dividends of $10,000. How much goodwill was inherent in the purchase of Little
Students educational experience : Determine whether each of the following statements is True, False or Uncertain, and explain your answers.
What is the carrying value of the franchise on december : The company has performed all the initial services which costed Nana Tili P1,497,728. What is the carrying value of the franchise on December 31, 2023
Calculate the discount yield on commercial paper : Suppose a company purchases $1 million of 180-day commercial paper issued by VP, a large finance company, for a price of $993,482. Calculate the discount yield
What is the pro?tability index-piggly-wiggly inc : Piggly-Wiggly Inc., owns a parcel of land that is not zoned for grocery store operations. The company is loathed to let the land stand idle and has come up with
Strategic plan and mission of company : Describe how the product or service fits into the overall strategic plan and mission of the company.
What is bad debt expense for the year : Wanda reported sales of $1,000,000 and recorded accounts receivables write-offs of $10,000. What is bad debt expense for the year 2020
Calculate the bond equivalent yield on commercial paper : Suppose a company purchases $10 million of 180-day commercial paper issued by KING Capital, a large finance company, for a price of $9,915,982.
What is the internal rate of return : Question - King's Department Store is contemplating the purchase of a new machine at a cost of $22,802. T

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd