Olive Theory Pizzeria is considering three different unrelated capital investments in 20YY. Presented is information pertaining...
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Olive Theory Pizzeria is considering three different unrelated capital investments in 20YY. Presented is information pertaining to each investment proposal. Initial investment Cash flow from operations Year 1 Year 2 Year 3 Proposal A Proposal B Proposal C $45,000 $45,000 $45,000 40,000 22,500 45,000 5,000 22,500 22,500 22,500 Disinvestment Life (years) Required: Determine each of the following: 3 3 a) Rank these investment proposals using the payback period, the accounting rate of return on initial investment, and the net present value criteria. Assume that the organization's cost of capital is 10 percent. Round all calculations to two decimal places. b) Explain the difference in rankings. Which investment would you recommend? Olive Theory Pizzeria is considering three different unrelated capital investments in 20YY. Presented is information pertaining to each investment proposal. Initial investment Cash flow from operations Year 1 Year 2 Year 3 Proposal A Proposal B Proposal C $45,000 $45,000 $45,000 40,000 22,500 45,000 5,000 22,500 22,500 22,500 Disinvestment Life (years) Required: Determine each of the following: 3 3 a) Rank these investment proposals using the payback period, the accounting rate of return on initial investment, and the net present value criteria. Assume that the organization's cost of capital is 10 percent. Round all calculations to two decimal places. b) Explain the difference in rankings. Which investment would you recommend?
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a Lets calculate the payback period accounting rate of return ARR on initial investment and net pres... View the full answer
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