\n<\/p>\n

<\/p>\n

PLEASE NOTE THE UNDERLINE. PER MY PROFESSOR, <\/strong><\/u><\/strong><\/p>\n

If you need help submitting assignments, please click here<\/u><\/a> for more information.<\/p>\n

There are three (3) types of textbook based homework items located at the end
\nof each chapter. These include Discussion Questions (DQ), Exercises (E), and
\nProblems (P). Some homework items have been custom created.<\/p>\n

Complete the following homework scenario:
<\/strong><\/p>\n

\n
Required:
Compare the results of the three (3) methods by quality of
\ninformation for decision making. Using what you have learned about the three (3)
\nmethods, identify the best project by the criteria of long term increase in
\nvalue. (You do not need to do further re<\/u>search.) Convey your understanding of
\nthe Time Value of Money principles used or not used in the three (3) methods.
\nReview the video titled \u201cNPV, IRR, MIRR for Mac and PC Excel\u201d (located at <\/iframe><\/u><\/a> and previously \nlisted in Week 4) to help you understand the foundational concepts:<\/p>\nScenario Information: Assume that two gas stations are for sale with \nthe following cash flows; CF1 is the Cash Flow in the first year, and CF2 is the \nCash Flow in the second year. This is the time line and data used in calculating \nthe Payback Period, Net Present Value, and Internal Rate of Return. The \ncalculations are done for you. Your task is to select the best project and \nexplain your decision. The methods are presented and the decision each indicates \nis given below.<\/p>\n<table>\n<tbody>\n<tr>\n<td>Investment<\/strong><\/td>\n<td>Sales Price<\/strong><\/td>\n<td>CF1<\/strong><\/td>\n<td>CF2<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Gas Station A<\/td>\n<td>$50,000<\/td>\n<td><\/span><\/td>\n<td>$100,000<\/td>\n<\/tr>\n<tr>\n<td>Gas Station B<\/td>\n<td>$50,000<\/td>\n<td>$50,000<\/td>\n<td>$25,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\nThree (3) Capital Budgeting Methods \nare presented:<\/p>\n<ol>\n<li>Payback Period:<\/strong> Gas Station A is paid back in 2 years; CF1 \nin year 1, and CF2 in year 2. Gas Station B is paid back in one (1) year. \nAccording to the payback period, when given the choice between two mutually \nexclusive projects, the investment paid back in the shortest time is \nselected.<\/li>\n<li>Net Present Value:<\/strong> Consider the gas station example above \nunder the NPV method, and a discount rate of 10%: NPVgas station A<\/sub> \n= $100,000\/(1+.10)2<\/sup> – $50,000 = \n$32,644<\/strong> NPVgas station B<\/sub> = $50,000\/(1+.10) + \n$25,000\/(1+.10)2<\/sup> – $50,000 = $16,115<\/strong><\/li>\n<li>Internal Rate of Return:<\/strong> Assuming 10% is the cost of funds; \nthe IRR for Station A is 41.421%.; for Station B, \n36.602.<\/li>\n<\/ol>\nSummary of the Three (3) Methods:<\/p>\n<ul>\n<li>Gas Station B should be selected, as the investment is returned in 1 period \nrather than 2 periods required for Gas Station A.<\/li>\n<li>Under the NPV criteria, however, the decision favors gas station A, as it \nhas the higher net present value. NPV is a measure of the value of the \ninvestment.<\/li>\n<li>The IRR method favors Gas Station A. as it has a higher return, exceeding \nthe cost of funds (10%) by the highest return<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/div>\n","protected":false},"excerpt":{"rendered":"PLEASE NOTE THE UNDERLINE. PER MY PROFESSOR, If you need help submitting assignments, please click here for more information. There are three (3) types of textbook based homework items located at the end of each chapter. These include Discussion Questions (DQ), Exercises (E), and Problems (P). Some homework items have been custom created. Complete the […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_joinchat":[]},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts\/172058"}],"collection":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/comments?post=172058"}],"version-history":[{"count":0,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts\/172058\/revisions"}],"wp:attachment":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/media?parent=172058"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/categories?post=172058"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/tags?post=172058"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}