Brady 20.000 Rogers 30.000 Kaepernick 15,000 BRADY Payback cumulative 10,000 18,000 8,000 9,000 10,000 8.000 6.000 41,000 2.000 8,000 0.25 Capital Project Options: Investment required Annual net cash flow Year 1 Year 2 Year 3 Year 4 Year 5 Total cash flow for 5 yrs Usefule life in years "Hurdle rate cost of capital) Estimated Salvage Value Average annual cash flow Payback Period Accounting rate of return Internal rate of return Net Present Value Profitability Index 10.000 8.000 8,000 4,000 5.000 35.000 5 20.00% 5,000 7.000 2.25 25.60% 30,45% $4.462 1.2231 6,000 6,000 10,000 10,000 4.000 36,000 5 20.00% 12.000 7.200 5 20.00% 10,000 8.200 ARR Average annual cash flow Less depreciation Equals Pre tax income 20% Less taxes After tax income Average investment 7,000 -3000 4,000 -800 3.200 12500 25.60% IRR Which project should be eliminated? Which project would you select if you needed your money returned ASAP? The Accounting Rate of Return Overstates' actual cash flow for which project? The Accounting Rate of Rotum 'Understates' actual cash flow for which project? Which project would you select to maximize the profit retur? IRR NPV -20,000 10,000 8,000 8.000 4.000 10.000 30.45% -20,000 8330 5552 4632 1928 4020 4,462 $24.462.00 $24.462.00 CF rate 10.000 0.833 8,000 0.694 8.000 0.579 4,000 0.482 10.000 0.402 NPV PI 20,000 20.000 1.223 1.223 1.223