Net Present Value

Even though you$$re fairly certain that your evaluation and elimination is correct, you would like to compare the three proposals using the net present value method, and get some data about the internal rate of return of the proposals, each of which are expected to generate their respective annual net cash inflows for a period of $10$ years.

Compute the net present value of each proposal. You may need the following partial table of factors for present value of an annuity of $$1.$ Round the present value of annual net cash flows to the nearest dollar. If your answer is zero enter $"0".$ For the net present value, if required, use the minus sign $(-)$ to indicate a negative amount.

Present Value of an Annuity of $$1$

at Compound Interest $($Partial Table$)$

Year $10\%20\%$

$10\mathrm{.}9090\mathrm{.}833$

$53\mathrm{.}7912\mathrm{.}991$

$106\mathrm{.}1454\mathrm{.}192$

Alpha Beta Gamma

Annual net cash flow $fill in the blank b$2$ee$2409100$d$03$a$\_1$

$351,145$

$fill in the blank b$2$ee$2409100$d$03$a$\_2$

$461,411$

$fill in the blank b$2$ee$2409100$d$03$a$\_3$

$598,133$

Present value factor fill in the blank b$2$ee$2409100$d$03$a$\_4$

fill in the blank b$2$ee$2409100$d$03$a$\_5$

fill in the blank b$2$ee$2409100$d$03$a$\_6$

Present value of annual net cash flows $fill in the blank b$2$ee$2409100$d$03$a$\_7$

$fill in the blank b$2$ee$2409100$d$03$a$\_8$

$fill in the blank b$2$ee$2409100$d$03$a$\_9$

Amount to be invested fill in the blank b$2$ee$2409100$d$03$a$\_10$

$1,472,000$

fill in the blank b$2$ee$2409100$d$03$a$\_11$

$5,678,900$

fill in the blank b$2$ee$2409100$d$03$a$\_12$

$2,125,560$

Net present value $fill in the blank b$2$ee$2409100$d$03$a$\_13$

$fill in the blank b$2$ee$2409100$d$03$a$\_14$

$fill in the blank b$2$ee$2409100$d$03$a$\_15$

Question Content Area

Final Questions

After reviewing all your data, answer the following questions $(1)-(3).$

$1.$ What can you say about each proposal?

Proposal Internal Rate

of Return

Alpha

Beta

Gamma

$2.$ What can you say about these proposals?

a$.$ HomeGrown would be breaking even $($i$.$e$.,$ profit $=0)$ if Alpha$$s proposal is chosen.

b$.$ Only Gamma$$s proposal is yielding more than HomeGrown$$s minimum desired rate of return.

c$.$ Gamma$$s proposal is the only proposal that would be acceptable to HomeGrown.

$3.$ Which proposal is the best choice for HomeGrown given the data collected?