Question
An accounting firm is considering expanding their operations into new office space so that they can hire more staff and expand their company. The new
An accounting firm is considering expanding their operations into new office space so that they can hire more staff and expand their company. The new lease requires a 5-year commitment. If the firm expands its operations, profits are expected to increase by $250,000 during 2023 and then those additional profits should increase by 12% each year from 2024 to 2027. Leasehold improvements to move into the new office space will cost the firm $850,000 with an estimated useful life of 5 years.
1. Compute the Net Present Value (NPV) of moving into the new office space, assuming a required rate of return of 10 percent. Explain. (15 words minimum 3 points) 2. Compute the Internal Rate of Return (IRR) for the proposal. Explain. (15 words minimum 3 points) 3. Compute the Payback Period (undiscounted) of the proposal. Explain. (15 words minimum 3 points)
4. Using your answers from #1 - #3, make a recommendation as to whether you would recommend expanding into the new office space. Include both quantitative (numerical) and qualitative (non-numerical) reasons for your recommendation. (150 words minimum 5 points).
Can you please just only Answer 4?
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