mgmt2023, Business Management

Assignment Help:
A company is considering whether to purchase a piece of land that has come up for sale at a cost of $10 million. Two suggestions have been made for the use of the land. One is to construct a number of private houses for sale and the other is to construct an amusement park. The company’s management accountants have made the following estimates of both projects’ net cash flows (including the cost of the land):



Year


Private House

($ Million)


Amusement Park ($ Million)

0


-10


-10

1


-5


-8

2


+7


+4

3


+9


+6

4


+4


+8

5





+7

6





+9



The company uses NPV to evaluate projects and normally takes 10 % as a discount rate for the house-building investment and 18% as the discount rate for the amusement park. The IRR of the housing investment is 12.5% and the amusement part produces a return of 18.6%. Which is the better investment decision for the shareholders of the company? Show all calculations.


Related Discussions:- mgmt2023

Enumerate the benefits that e-auctions bring to e-auctioneer, QUESTION 1 ...

QUESTION 1 (a) Explain the term e-procurement and asses the pros and cons of e-procurement. (b) What are the challenges that may be faced in implementing e-procurement in th

What is an art of classifying, What is an art of classifying? Art of ...

What is an art of classifying? Art of classifying: Classifying is a procedure of grouping transactions or entries of one nature within one place. This is completed by ope

What are the objectives of the inventory control, What are the objectives o...

What are the objectives of the Inventory Control? Inventory control is concerned with achieving an optimum balance between two objectives which are:- 1. For minimising inves

Define leadership and analyse the main styles of leadership, QUESTION 1 ...

QUESTION 1 Communication constitutes the exchange of information and the transmission of meaning. As such it is the lifeblood of an organisation." Discuss. QUESTION 2 D

What is the meaning of term entrepreneurship, What is the meaning of term E...

What is the meaning of term Entrepreneurship? Meaning of Entrepreneurship: Entrepreneurship refers to a process of action an entrepreneur undertakes to establish h

Corporate Philanthropy., describe the criteria you would use if you were a ...

describe the criteria you would use if you were a manager charged with evaluating corporate contributions to decide whether or not to give to a particular organization.Ask question

What do you mean by line and staff organisation, What do you mean by Line a...

What do you mean by Line and Staff Organisation? Line and Staff Organisation: When the industry grew within size and complexity, the line executives could not carry

A definition of personality, Problem 1 Define ‘personality'. Explain th...

Problem 1 Define ‘personality'. Explain the personality traits influencing Organisational behaviour. A Definition of personality Listing the personality traits Ex

PURCHASING AND SUPPLY SYSTEM, STEPS TO BE FOLLOWED IN THE PROCESS OF EVALUA...

STEPS TO BE FOLLOWED IN THE PROCESS OF EVALUATING PURCHASING AND SUPPLY SYSTEM

Business, Sam bought a leather corner sofa and chair from SCS Edinburgh for...

Sam bought a leather corner sofa and chair from SCS Edinburgh for £5,490 in July 2009. Less than a year later, she noticed that the sofa’s stitching had started to unravel and repo

Write Your Message!

Captcha
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