Question
Nike Year 0 1 2 3 4 5 Initial Investment $1,800,000 Depreciation @ 15% $270,000 $270,000 $270,000 $270,000 $270,000 Book Value at Year-End $1,800,000 $1,530,000
Nike
Year | 0 | 1 | 2 | 3 | 4 | 5 |
Initial Investment | $1,800,000 | |||||
Depreciation @ 15% | $270,000 | $270,000 | $270,000 | $270,000 | $270,000 | |
Book Value at Year-End | $1,800,000 | $1,530,000 | $1,260,000 | $990,000 | $720,000 | $450,000 |
Cash Flows | $400,000 | $450,000 | $400,000 | $350,000 | $300,000 | |
Profit | $130,000 | $180,000 | $130,000 | $80,000 | $30,000 | |
ARR (%) | 8.67% | 14.29% | 10.33% | 5.33% | 2% | |
Payback (years) | 4.5 | |||||
NPV @ 10% | $95,000 |
Requirements:
- Calculate the ARR, payback period, and NPV.
- Evaluate the investment's financial feasibility.
- Provide a recommendation.
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Principles Of Engineering Economic Analysis
Authors: John A. White, Kenneth E. Case, David B. Pratt
6th Edition
1118163834, 978-1118163832
