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    ADHAM SAFI
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    The document summarizes a capital budgeting analysis for an investment with an initial cost of $3 million and annual net cash flows of $900,000 for 5 years. It calculates the net present value of the investment as $17,700 by discounting the annual cash flows at 15% and subtracting the initial cost. It also notes that the simple rate of return is 10% and that since the NPV is positive, the investment should be accepted.

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    The document summarizes a capital budgeting analysis for an investment with an initial cost of $3 million and annual net cash flows of $900,000 for 5 years. It calculates the net present value of the investment as $17,700 by discounting the annual cash flows at 15% and subtracting the initial cost. It also notes that the simple rate of return is 10% and that since the NPV is positive, the investment should be accepted.

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    © All Rights Reserved
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    10 views1 page

    $ROKFSC5

    Uploaded by

    ADHAM SAFI
    The document summarizes a capital budgeting analysis for an investment with an initial cost of $3 million and annual net cash flows of $900,000 for 5 years. It calculates the net present value of the investment as $17,700 by discounting the annual cash flows at 15% and subtracting the initial cost. It also notes that the simple rate of return is 10% and that since the NPV is positive, the investment should be accepted.

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    © All Rights Reserved
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    Assignment title: Capital Budgeting Decisions

    Student Name : adham majed hasan safi


    Student Number : 201080767
    Lecture Time : 11-12:30
    The solution is as the following:
    1)
    Initial Investment = $3,000,000
    Net Operating Income = $300,000
    Add: Depreciation = $600,000
    Net Annual Cash Flow = $900,000
    (15%) pv factor
    1- $900,000 0.870 $783,000
    2- $900,000 0.756 $680,,400
    3- 900,000 0.658 $592,200
    4- $900,000 0.572 $514,800
    5- $900,000 0.497 $447,300
    Total ($3,017,700)
    Pv of net annual cash flows ($3,015,900)
    - Intial investment ($3,000,000)
    Net present value = $17,700
    2.
    the simple rate of return would be:
    annual incemantl net income
    simplerate of return=
    intial investment

    300,000/3,000,000 = 10%

    3. nvp is positive this investment should be taken by derrick

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