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 are the various stages of the decision making process, What are the va...

What are the various stages of the decision making process? Decision Making Process: A good decision can merely be made as a result of a rational decision making process.

Goverment companies, #what is a goverment compony&futures of advantages& di...

#what is a goverment compony&futures of advantages& disadvantages

Nature of the production systems, It is characterized by the number of m...

It is characterized by the number of manufacturing stages and the inter relationship between various production operations e, g, in product line systems inventory con

Explain the components of the specific business environment, Question: ...

Question: (a) Frederick Taylor observed that workers worked below their optimum level (soldiering). He thus devised systematic methods based on a set of principles. These princ

Cycle inventories, Cycle inventories are held for the reason that purcha...

Cycle inventories are held for the reason that purchases are usually made in lots rather than the exact amount which may be needed at a point of time. Of course if all p

What are the principles of delegation of authority, What are the principles...

What are the principles of delegation of authority? Principles of delegation of authority: a. Parity in between authority and responsibility: There must be whole parity

Improve business processes, Discuss why has direct marketing continued to g...

Discuss why has direct marketing continued to grow? Using Internet technology to improve business processes • Discuss how this technology can unlock new business opportunities •

Evaluate the business objectives, On 15 January 2010, a German bank, Schwar...

On 15 January 2010, a German bank, Schwarzböse, will complete the acquisition of a UK financial services provider, Klesvask, that offers pensions, insurance and investments. Klesva

Buffer stock, The demand and supply can never be assessed exactly. Ther...

The demand and supply can never be assessed exactly. There is discrepancy between actual and estimated demand and supply quantities with fair degree of uncertainty. A b

Discuss the possible problems that teams at trinova ltd, QUESTION Team...

QUESTION Teams are emerging as a powerful management tool also are popping up in the most unexpected places, such at TRINOVA Ltd. The organisation utilizing more than 40 teams

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