Greetings to the solvent,
The first 3 pictures represent info needed. Chegg has other variations that can be used as a resource to solve this problem. I thank you for taking on this task, and I hope your productivity shines with this problem. Best of Luck! Jamie V.
Sung Kim has run a forklift repair company for years, but she is bored with it and wants to branch out into something new. Her business line of credit has $20,000 of available funds at 6%, and she wants at least an 8% return on top of that. She is very excited about the idea of buying a small trailer to put in the parking lot of her business. She will sound-proof it, lease air time, and run a talk radio show late at night when she can get air time cheaply. She estimates the following cash flows: Her spouse and business partner wants her to invest in a used oil-burning furnace that will both heat the shop and provide additional revenue by charging a fee to dispose of used oil for other companies. Local businesses are lined up to sell used oil to Independent Forklift right now, but someone else may grab this opportunity if IF does not. Cash flows from the oil burner are projected to be: Both options cost $20,000. Both options have a four-year time horizon. At the end of four years, the talk-radio trailer will have no residual value. The oil burner can be sold for $6,000. CC LICENSED CONTENT, ORIGINAL - Introduction to Budgeting. Authored by: Joseph Cooke. Provided by: Lumen Learning. License: CC BY: Attribution Sung can only do one or the other. She is really only interested in the talk radio and sees that as a way to retire from the forklift repair business. She's done her research and is confident she can make a go of it. Make a recommendation to Sung Kim. Choose one or the other option and justify it to her. Make sure you discuss the pros and cons of both options, but also make sure you choose only one. Address the following in your answer: Phase 1 - Screening 1. Begin with the larger picture 2. Identify and evaluate potential opportunities 3. Screen opportunities Phase 2 - Analysis 4. Estimate operating and implementation costs 5. Estimate cash flow 6. Assessment Phase 3 - Implementation 7. Select the project 8. Implement the project For step 9 , depending on which option you recommended, do an after-action review based on the following actual results four years later: Talk Radio Oil Burner - sold for $4,000 at the end of 4 years CC LICENSED CONTENT, ORIGINAL - Introduction to Budgeting. Authored by: Joseph Cooke. Provided by: Lumen Learning. License: CC BY: Attribution Prepared for Sung Kim of Independent Forklift Prepared for Sung Kim of Independent Forklift Payback period, accounting rate of return, and net present value. Payback period, accounting rate of return, and net present value. Talk Radio Option Used Oil Burner Option IF USING EXCEL OR OTHER SPREADSHEET, EVERYTHING BELOW THIS LINE SHOULD BE FORMULAS 2 Compute the Accounting Rate of Return (a) compute average annual accounting income Annual net operating cash flows Depreciation Net accounting income Divided by project life Average annual accounting income (b) compute average amount invested \begin{tabular}{l} Beginning investment book value \\ \hline Ending investment book value \end{tabular} does not include original investment or residual value Annual net operating cash flows does not include original investment or residual value Depreciation Net accounting income Divided by project life Average annual accounting income Ending investment book value Beginning investment book value (cost) Divided by (c) compute ARR \begin{tabular}{|c|l|l|} \hline Average annual accounting & Average amount & Accounting Rate of \\ \hline & & \\ \hline \end{tabular} (round to nearest tenth of a percent) \begin{tabular}{|c|l|l|} \hline Average annual accounting & Average amount & Accounting Rate of \\ \hline & & \\ \hline \end{tabular} (round to nearest tenth of a percent) 3 Compute the net present value of the investment Compute the profitability index, rounded to two decimal places. 5 Would you recommend this investment? Why or why not? Optional Compute the net present value of the investment using Excel's PV function. The PV 1 Optional Compute the net present value of the investment using Excel's NPV function \begin{tabular}{|r|l|} \multicolumn{1}{|c|}{ Period } & \multicolumn{1}{|c|}{ Cash Flows } \\ \cline { 2 - 2 } 1 & \\ \hline 2 & \\ \hline 3 & \\ \hline 4 & \\ \hline Hurdle rate & \\ \hline Present value of net cash flows & \\ \hline Cost of asset & \\ \hline Net Present Value & \\ \hline \end{tabular} includes proceeds from sale \begin{tabular}{|r|r|} \hline \multicolumn{1}{|c|}{ Period } & \multicolumn{1}{|c|}{ Cash Flows } \\ \cline { 2 - 2 } 1 & \\ \hline 2 & \\ \hline 3 & \\ \hline 4 & \\ \hline Hurdle rate & \\ \hline Present value of net cash flows & \\ \hline Cost of asset & \\ \hline Net Present Value & \\ \hline \end{tabular} Optional Compute the internal rate of return of the investment using Excel's IRR function. Display to two decimal places, but do not round. \begin{tabular}{|l|l|} \hline Cash Flow Year 0 (Cost) & \\ \hline Cash Flow Year 1 & \\ \hline Cash Flow Year 2 & \\ \hline Cash Flow Year 3 & \\ \hline Cash Flow Year 4 (included proceeds from sale) \\ \hline \multicolumn{2}{|c|}{} \\ \hline \multicolumn{2}{|c|}{} \\ \hline \end{tabular} Note: IRR requires a negative amount for the investment. \begin{tabular}{|l|l|} \hline Cash Flow Year 0 (Cost) & \\ \hline Cash Flow Year 1 & \\ \hline Cash Flow Year 2 & \\ \hline Cash Flow Year 3 & \\ \hline Cash Flow Year 4 (included proceeds from sale) \\ \hline \multicolumn{2}{|l|}{} \\ \hline \end{tabular} Optional Proof of IRR
