Capital Investment Analysis

profilehalramadhan

 Gyro Corporation is considering two investment projects, each of which will cost $1,340,000.  The estimated cash flow for each project is as follows.

 

 

Retail

 

Plant

Store

Year

Expansion

Expansion

1

             450,000

             500,000

2

             450,000

             400,000

3

             340,000

             350,000

4

             280,000

             250,000

5

             180,000

             200,000


Total

         
1,700,000

         
1,700,000

The company has decided that a 10% discount rate is appropriate for each project.

Required:

  1. Calculate the payback period for each project.
  2. Calculate the Net Present Value (NPV) of each project.
  3. Advise management on which, if either, project to pursue and why.

Use an Excel spreadsheet for your answers.

You need to do deep and clear analysis. 

Show your work by writing the formulas.

Follow the instructions carefully.

 

 

 

    • 7 years ago
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