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

What types of problems are solved by breakeven analysis, What types of prob...

What types of problems are solved by breakeven analysis? Breakeven Analysis assists solving the given types of problems as follows: 1. What volume of sales will be essentia

The use of var for capital requirement for market risk, Question 1 Identif...

Question 1 Identify and assess the different IRR measurement techniques implemented in a bank Question 2 Describe the use of VaR for capital requirement for market risk Ques

Models, definition of a model

definition of a model

Service quality model, One of the best models on service quality has bee...

One of the best models on service quality has been presented by three persons viz. Valerie A. Zeithaml A. Parasuraman and Leonard L . Beery. The gaps that are shown in

What are the four p variables of marketing, What are the four P variables o...

What are the four P variables of Marketing? Four ‘P’ variables of Marketing: Marketing may be described as a human activity directed at satisfying wants and needs by exchange

Describe michael porter''s five forces, (a) Outline the method of carrying ...

(a) Outline the method of carrying out a quantitative survey which is used in the market research. (b) Describe Michael Porter's five forces that is used to analyse the micro en

Business-to-consumer trading through online trading, Technology has transfo...

Technology has transformed organisations, industries and ways of doing business.  Explain the reasons for the growth of business-to-consumer (B2C) trading through onlin

Discuss the two main types of competitive pressure, Question 1: "The ov...

Question 1: "The overall attractiveness of a country as a market/investment site depends on balancing the likely long-term benefits of doing business in that country against th

The essential principles which govern effective delegation, QUESTION 1 ...

QUESTION 1 Elaborate on the essential principles which govern effective delegation. QUESTION 2 Give a detailed account of what you consider to be the three main parts o

Economic feasibility analysis, Q. Economic feasibility analysis? Feasib...

Q. Economic feasibility analysis? Feasibility Analysis: - The feasibility analysis carefully examine economic, operational, technical, scheduling, legal and strategic factors o

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