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Boeing is analyzing a $2,000,000 capital investment with the following data: Initial Investment: $2,000,000 Depreciation @ 15%: $300,000/year Book Value at Year-End: $1,700,000, $1,400,000, $1,100,000,

Boeing is analyzing a $2,000,000 capital investment with the following data:

  • Initial Investment: $2,000,000
  • Depreciation @ 15%: $300,000/year
  • Book Value at Year-End: $1,700,000, $1,400,000, $1,100,000, $800,000, $500,000, $200,000, $0
  • Cash Flows: $600,000, $500,000, $400,000, $300,000, $200,000, $100,000, $50,000
  • Profit: $300,000, $200,000, $100,000, $0, $-100,000, $-200,000, $-250,000
  • ARR: 15%, 10%, 5%, 0%, -5%, -10%, -12.5%
  • Average Profits: $7,143
  • Average Investment: $1,100,000
  • Average ARR: 0.65%
  • Payback: 4.2 years
  • NPV @ 12%: $123,000

Requirements:

  1. Calculate the ARR, payback period, and NPV.
  2. Discuss the feasibility of the investment.
Provide recommendations based on the analysis.

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