Horner Company Method Comparison Average Rate of Retur Cash Payback Method Net Present Value Home Grown Company Home Company is a chain of grocery stores that are similar to indoor farmer's markets, providing fresh, social produce, meats, and davy products to consumers in urban area. Hometown comiden opening several stores in a new cly, and tus proposan trom three contractors (Alpha, Bets, and anima companies) who would like to provide buildings for the new stores The wount of expected reverse trom the stores will depend on the design of the contractor For example, it HomeGrown decides on a more open floor plan with lots shell space for products, rever would be overall However, It HomeGrow decides on a very crowded for plant way to customers who appreciate a more open foet As the proct manager los Home Grown, you are responible for deciding which it any of the proposals to accept HomeGrow's minimum acceptable rate of retom 20 You cw the we three contact Proposal Residual Value 50.00 Type of Floor Plan Wory spent an indoor farmers market Standard grocery shelving and out me space Meena and she was Investment if selected $1,472,000 $6,079,300 12.325,700 te 30.00 50 00 You have computed estimates of annual cash flows and average annual income from customers for each of the three contractors plans. You believe that the annual cash flows will be equal for each of the 10 years for which you are preparing your catalnestment Basis Your conclusions are presented in the following table Estimated Average Annual income Estimated Average Proposal tatter depreciation) Annual Cash Flow 5201014 5351.145 201195 $500 141 3571.000 S60 654 Mastery Problem: Capital Investment Analysis Home Grown Company Method Comparison Average Rate of Return Cash Payback Method Not Present Value Method Comparison Compare methods of capitalent in the following able to begin your evaluation of the three wit stant proposals Alpha, eta and Gamme you decide to compare four method the ambitnecesentate and internateretum methods Home Grown Company Method Comparison Average Rate of Return Cash Payback Method Net Present Value Method Comparison Average Rate of Return Method Cash Payback Method Net Present Value Method Internal Rate of Return Method Candidees the time value of money Does not consider the time value of money Easy to compute Not as easy to come BO Directly considers expected cash flow Dendly considers tining of expected cash flows Asumes throws can be revealed at minum desiredale of retum Canteed to prophe il procesamente Mastery Problem: Capital Investment Analysis Homerown Company Method Comparison Average Rate of Retum Cash Payback Method Net Present Value Method Companion Average Rate of Return You begin by trying to eliminate any proposals that are not yielding the company's minimum required tate of tetan eros Complete the fofowing table, and decide whether Alcha. Bet, andor Garrote should be eliminated because the average rate of setum of their project is less than the company mummum required ratt et retom Complete the following table inter the average rates or return as percentages rounded to two decimal places Estimated Average Annual income Proposal Average Investment Average Rate of Retur Accept or Roject Home Grown Company Method Comparison Average Rate of Return Cash Payback Method Net Present Value Method Comparison Average Rate of Retur Cash Payback Method Yox/ve decided to contume yout results from the werage rate of retum by using the cash payback method. trong the following table, compute the cash payback perod of each investment required, round me number of years in the cash payback period to show unter Proposal Initial Cost Annual Net Cash Inflow Cash Payback period in Years Damma Home Grown Company Method Comparison Average Rate of Return Cash Payback Method Net Present Value Method Comparison Average Rate of Retum Cash Payback Method Net Present Value Even though you've triely certain that you evaluation and elimination is correct, you would ake to compare the three proposals using the net present vase metod, and get some da about the ritemal rate of return of the proposals, each of which are expected to generate their respective wat met cash intows for a period of 10 years. Computer the net present value of each proposal You may need the following partar table of factors for student an actuly or S1 Ender uncents that represent cast outlowa os negative numbers using a minut sign. Round the prosent value of annual net cash rows to the nearest delar Present Value of an Annuity of 81 at Compound Interest (Partial Table) Year 10% 20% 1 0.00 0.833 5 3.791 2901 4192 10 0.145 takeAssignment/takeAssignment Main.do?invoker=&take AssignmentSessionLocator=&inprogress=false Home Grown Company Method Comparison Average Rate of Return Cash Payback Method Net Method Comparison Average Rate of Return Cash Payback Method Net Present Value 1 0.909 0.833 5 3.791 2.991 10 6.145 4.192 Alpha Beta Gamma $ Annual net cash flow Present value factor Present value of annual net cash flows S S Less amount to be invested $ $ $ Net present value S $ Mastery Problem: Capital Investment Analysis Home Grown Company Method Comparison Average Rate of Return Cash Payback Method Net Present Val Method Comparison Average Rate of Return Cash Payback Method Net Present Value Final Questions 1. What can you say about each proposal? Internal Rate of Return Proposal Alpha Beta Gamma 2. What can you say about these proposals? Check all that apply Gamma's proposal is the only proposal that would be acceptable to Home Grown Only Gamma's proposal is yielding more than Home Grown's minimum desired rate of return Home Grown would be breaking even (ie, profit = 0) if Alpha's proposal is chosen Horner Company Method Comparison Average Rate of Retur Cash Payback Method Net Present Value Home Grown Company Home Company is a chain of grocery stores that are similar to indoor farmer's markets, providing fresh, social produce, meats, and davy products to consumers in urban area. Hometown comiden opening several stores in a new cly, and tus proposan trom three contractors (Alpha, Bets, and anima companies) who would like to provide buildings for the new stores The wount of expected reverse trom the stores will depend on the design of the contractor For example, it HomeGrown decides on a more open floor plan with lots shell space for products, rever would be overall However, It HomeGrow decides on a very crowded for plant way to customers who appreciate a more open foet As the proct manager los Home Grown, you are responible for deciding which it any of the proposals to accept HomeGrow's minimum acceptable rate of retom 20 You cw the we three contact Proposal Residual Value 50.00 Type of Floor Plan Wory spent an indoor farmers market Standard grocery shelving and out me space Meena and she was Investment if selected $1,472,000 $6,079,300 12.325,700 te 30.00 50 00 You have computed estimates of annual cash flows and average annual income from customers for each of the three contractors plans. You believe that the annual cash flows will be equal for each of the 10 years for which you are preparing your catalnestment Basis Your conclusions are presented in the following table Estimated Average Annual income Estimated Average Proposal tatter depreciation) Annual Cash Flow 5201014 5351.145 201195 $500 141 3571.000 S60 654 Mastery Problem: Capital Investment Analysis Home Grown Company Method Comparison Average Rate of Return Cash Payback Method Not Present Value Method Comparison Compare methods of capitalent in the following able to begin your evaluation of the three wit stant proposals Alpha, eta and Gamme you decide to compare four method the ambitnecesentate and internateretum methods Home Grown Company Method Comparison Average Rate of Return Cash Payback Method Net Present Value Method Comparison Average Rate of Return Method Cash Payback Method Net Present Value Method Internal Rate of Return Method Candidees the time value of money Does not consider the time value of money Easy to compute Not as easy to come BO Directly considers expected cash flow Dendly considers tining of expected cash flows Asumes throws can be revealed at minum desiredale of retum Canteed to prophe il procesamente Mastery Problem: Capital Investment Analysis Homerown Company Method Comparison Average Rate of Retum Cash Payback Method Net Present Value Method Companion Average Rate of Return You begin by trying to eliminate any proposals that are not yielding the company's minimum required tate of tetan eros Complete the fofowing table, and decide whether Alcha. Bet, andor Garrote should be eliminated because the average rate of setum of their project is less than the company mummum required ratt et retom Complete the following table inter the average rates or return as percentages rounded to two decimal places Estimated Average Annual income Proposal Average Investment Average Rate of Retur Accept or Roject Home Grown Company Method Comparison Average Rate of Return Cash Payback Method Net Present Value Method Comparison Average Rate of Retur Cash Payback Method Yox/ve decided to contume yout results from the werage rate of retum by using the cash payback method. trong the following table, compute the cash payback perod of each investment required, round me number of years in the cash payback period to show unter Proposal Initial Cost Annual Net Cash Inflow Cash Payback period in Years Damma Home Grown Company Method Comparison Average Rate of Return Cash Payback Method Net Present Value Method Comparison Average Rate of Retum Cash Payback Method Net Present Value Even though you've triely certain that you evaluation and elimination is correct, you would ake to compare the three proposals using the net present vase metod, and get some da about the ritemal rate of return of the proposals, each of which are expected to generate their respective wat met cash intows for a period of 10 years. Computer the net present value of each proposal You may need the following partar table of factors for student an actuly or S1 Ender uncents that represent cast outlowa os negative numbers using a minut sign. Round the prosent value of annual net cash rows to the nearest delar Present Value of an Annuity of 81 at Compound Interest (Partial Table) Year 10% 20% 1 0.00 0.833 5 3.791 2901 4192 10 0.145 takeAssignment/takeAssignment Main.do?invoker=&take AssignmentSessionLocator=&inprogress=false Home Grown Company Method Comparison Average Rate of Return Cash Payback Method Net Method Comparison Average Rate of Return Cash Payback Method Net Present Value 1 0.909 0.833 5 3.791 2.991 10 6.145 4.192 Alpha Beta Gamma $ Annual net cash flow Present value factor Present value of annual net cash flows S S Less amount to be invested $ $ $ Net present value S $ Mastery Problem: Capital Investment Analysis Home Grown Company Method Comparison Average Rate of Return Cash Payback Method Net Present Val Method Comparison Average Rate of Return Cash Payback Method Net Present Value Final Questions 1. What can you say about each proposal? Internal Rate of Return Proposal Alpha Beta Gamma 2. What can you say about these proposals? Check all that apply Gamma's proposal is the only proposal that would be acceptable to Home Grown Only Gamma's proposal is yielding more than Home Grown's minimum desired rate of return Home Grown would be breaking even (ie, profit = 0) if Alpha's proposal is chosen