Question
Project A: Expand the manufacturing facility to increase capacity by 20 percent. This investment is expected to cost $360,000 and generate net cash flow of
Project A: Expand the manufacturing facility to increase capacity by 20 percent. This investment is expected to cost $360,000 and generate net cash flow of $80,000 per year for the next eight years.
Project B: Overhaul the company website to optimize the user experience and generate more traffic from online advertising. This project would cost $200,000 and is expected to generate an additional $100,000 in sales for the next 10 years. Assume that the contribution margin is 42 percent and that there would be no increase in fixed costs, including depreciation.
Project C: Invest in solar panels and more fuel-efficient delivery vehicles to reduce operating expenses (e.g., electricity and fuel) and the companys carbon footprint. The initial investment in assets would be $360,000, which would be depreciated over five years. The investment is expected to increase net income by $18,000 per year, after the depreciation adjustment.
**I'm not sure how Project B has a payback period of 5 years. Please help show work for this one as well**
1. Compute the payback period for each project. Note: Round your answer to 1 decimal place. Answer is complete and correct. Compute the NPV of each project assuming the cost of capital is 10 percent. Note: Round your PV amounts to 4 decimal places. Answer is not complete. Compute the profitability index of each project. Note: Round your answer to 2 decimal places
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started