10 points Complete the following homework scenario: Compare the results of the three (3) methods by quality of information for decision making. Using what you have learned about the three (3) methods, identify the best by the criteria of long term increase in value (You do not need to do further research) Convey your understanding of the Time Value of Money principles used or not us the three (3) methods. Review the video titled "NPV, IRR, MIRR for Mac and PC Excel (located at https://www.youtube.comwatch?v=C7CryVFBc and previously liste Week 4) to help you understand the foundational concepts Scenario Information: Assume that two gas stations are for sale with the following cash flows: CF1 is the Cash Flow in the first year, and CF2 is the Cash Flow in the second year. This is the Timeline and data used in calculating the Payback Period, Net Present Value, and internal Rate of Return. The calculations are done for you. Your task is to select the best project and explain your decision. The methods are presented and the decision each indicates is given below ards Investment Sales Price CF1 CF2 Gas Station A 550.000 50 $100,000 Gas Station 3 550 000 550.000 $25.000 year According to the palack period Three (3) Capital Budgeting Methods are presented 1 Payback Period: Gas Station A is paid back in 2 years F1 in year and CF2 in year 2 Gas Station is paid back in one whion given the choice betweon two mutually exclustre projects the investment paid back in the shortest time is selected 2.Net Present Value: Consider the gas station example above under the NPV method and a discount of NV Gaston A5100 0001 102 550 000 $ Vas B=55000110525 10055 0516.115 3wal Rate of Returns to the cost of funds The RR for As for S 6 02 Summary of the Three Method NV - dards Investment Sales Price CF1 C F2 uction Gas Station A $50,000 $0 $100,000 Gas Station B $50,000 $50,000 $25,000 Three (3) Capital Budgeting Methods are presented 1. Payback Period: Gas Station A is paid back in 2 years: CF1 in year 1 and CF2 in year 2 Gas Station B is paid back in one (1) year. According to the payback period when given the choice between two mutually exclusive projects, the investment paid back in the shortest time is selected 2. Net Present Value: Consider the gas station example above under the NPV method and a discount rate of 10% NPV gas station A $100.000:1 102 $50.000-$32644 NPV gas station B 550 600/11+ 10) $25.0001 101.550.000 = 516,115 3. Internal Rate of Returnt Assuming 10% is the cost of funds. The IRR for Station A is 41421% for Station B. 36 602 Summary of the Three (3) Methods Gas Station should be selected the investment is returned in period rather than 2 perkids required for Gas Station A Under the NPV however the decision favors on station Aasith hohernet press Value NPV is a mature of the value of the investment The IRR method favors Gas Station has a higher retur excesing the cost of funds (10%) by the highest retum Question: What is a drawback(s) of using the Payback Period Method? The Payback period od is simple to understand The Payback period Method ignore theme value of money The Payback period Methodi s t shoes beyond the payback period Both Band None of the above