Bufn 640 Case 1
Autor: peterlock • April 9, 2017 • Case Study • 1,381 Words (6 Pages) • 451 Views
Q1. For each set of project cash flows, calculate the Return on Investment (Excess of cash flow over initial investment divided by the initial investment). Based upon these criteria, rank the projects.
Answer:
Project | Return on Investment |
1 | 1310/2000=0.655 |
2 | 165/2000=0.0825 |
3 | 8000/2000=4 |
4 | 1561/2000=0.7805 |
5 | 2200/2000=1.1 |
6 | 200/2000=0.1 |
7 | 560/2000=0.28 |
8 | 2150/2000=1.075 |
So, the rank of these projects based on the Return on Investment is:
Project: 3 5 8 2 4 1 7 6
Q2. For each set of project cash flows, calculate the payback period. Based upon these criteria, rank the projects.
Answer:
Project | Payment period |
1 | 6+(2000-330*6)/330≈6.06 |
2 | 2 |
3 | 14+2000/10000=14.2 |
4 | 6+(2000-160-200-350-395-432-440)/442≈6.05 |
5 | 7+(2000-280*7)/280≈7.14 |
6 | 0+2000/2200≈0.91 |
7 | 1+(2000-1200)/900≈1.89 |
8 | 5+(2000+350+60-60-350-700-1200)/2250≈5.04 |
So, the rank of these projects based on payment period is:
Project: 6 7 2 8 4 1 5 3
Q3. For each set of project cash flows, calculate the Internal Rate of Return (IRR). Based upon these criteria, rank the projects.
Answer:
Project | Rate of Return (IRR) |
1 | IRR(-2000,330,330,330,330,330,330,330,1000) IRR≈10.87% |
2 | IRR(-2000,1666,334,165) IRR≈6.31% |
3 | IRR(-2000,0,0,0,0,0,0,0,0,0,0,0,0,0,0,10000) IRR≈11.33% |
4 | IRR(-2000,160,200,350,395,432,440,…,-2000) IRR≈12.33% |
5 | IRR(-2000,280,280,280,280,280,280,…,280) IRR≈11.12% |
6 | IRR(-2000,2200) IRR≈10.00% |
7 | IRR(-2000,1200,900,300,90,70) IRR≈15.26% |
8 | IRR(-2000,350,60,60,350,700,1200,2250) IRR≈11.41% |
...