following is one question. thank you
James Denning wants to buy a caravan rental business in the inner Melbourne suburb of Richmond. James spends $1,730,000 on the purchase of the business including caravans and further advertising and signage costs amount to $350,000. He thinks he can net $570,000 each year after all costs are paid. He will work in the business and not take a salary. After 4 years of this venture, he aims to sell the business and the caravans. To be conservative, he allows only $430,000 as the amount recouped. Please answers the questions below. Where a number is required in the boxes below, please type in the number without a thousands separator. a. What is the PP for the caravan venture? PP (round the number to the nearest two decimal places and separate the decimals from the rest of the number by a dot ".") = years b. If James allows $140,000 as his own wage in his calculations and he could earn 5 per cent elsewhere on his funds, what is the NPV for the project? Please note that based on the discount rate of 5 per cent, the present value of an annuity of $1 per year for 4 years is $3.546, while the present value of $1 in 4 years is $0.8227. NPV=$ A company owned exclusively by residents in the New South Wales coastal community of Yamba is offered three projects for which the cash flows are as follows in thousands of dollars. The directors work on 10 per cent as their RRR. Assume all cash flows occur at the end of the relevant years. There are no salvage values factored into the expected cash flows, and no salvage values are expected. Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 A -770 240 220 210 150 160 B -920 210 210 260 280 370 C -1280 560 240 260 280 320 The discount factors based on the RRR are as follows: Year 1 0.9091 Year 2 0.8264 Year 3 0.7513 Year 4 0.683 Year 5 0.6209 Please answer the questions below. Where a number is required in the boxes below, please type in the number without a thousands separator. a. Calculate the three investment appraisal measures for each project. ARR for Project A (round the number to the nearest two decimal places and separate the decimals from the rest of the number by a dot "."): ARR for Project B (round the number to the nearest two decimal places and separate the decimals from the rest of the number by a dot "."): % % ARR for Project C (round the number to the nearest two decimal places and separate the decimals from the rest of the number by a dot "."): % PP for Project A (round the number to the nearest two decimal places and separate the decimals from the rest of the number by a dot "."): years PP for Project B (round the number to the nearest two decimal places and separate the decimals from the rest of the number by a dot "."): years PP for Project C (round the number to the nearest two decimal places and separate the decimals from the rest of the number by a dot "."): years NPV for Project A: $ NPV for Project B: 3': NPV for Project C: $ b. Rank the projects from 1 to 3 based on each individual investment appraisal measure and overall (with rank of 1 given to the project that is the best in terms of the individual investment appraisal measure or overall). For the overall ranking, please assume that each individual investment appraisal measure has the same weighting/importance. Project A Project B Project C Ranking based on ARR A A A v V v Ranking based on PP 0 0 0 Ranking based on NPV 0 0 0 Overall ranking 0 0 0
