QUESTION : Pros and Cons Analysis: Thorough discussion of the advantages and disadvantages of each method, with real-world examples.

Investment Analysis - Part 1 (table 1 )

Figure 1: Cash Flow Diagram (values in millions)

Payback

-18,500,000

+ 2,300,000

+2,300,000

+2,300,000

+3,400,000

+3,400,000

+4,000,000

= -800,000 left to recover at year 6

Portion of the 7th year: -800,000/4,000,000= 0.2 yrs

Total Payback= 6 years + 0.2 years= 6.2 years

NPV Calculations (MARR 13%)

Input Cash Flows into BAII Plus from Table 1

In the input menu of NPV (table with CF0, C01,)

• Input I= 13%

NPV>CPT= $1,650,147.119

IRR Calculations

Input Cash Flows into BAII Plus from Table 1

In IRR menu of BAII Plus

• IRR >CPT= 14.6%

Based on the cash flow

• Payback is calculated as years 6.2 years. Payback is therefore within our desired 8 years payback period
• Net present value (NPV), assessed at a MARR of 13% is 1,650,147.119. This indicates the project exceeds our MARR of 13%
• Internal Rate of Return for the project is 14.6%. This exceeds our MARR of 13%

QUESTION : Pros and Cons Analysis: Thorough discussion of the advantages and disadvantages of each method, with real-world examples.

CF0	-18,500,000
C01	2,300,000
F01	3
C02	3,400,000
F02	2
C03	4,000,000
F03	3
C04	5,000,000
F04	2
C05	4,200,000
F05	1
C06	6,200,000
F06	1

TABLE 1
Time (in years)	Purchase price	Annual Operating Costs	Annual Revenue	Net Cash Flow	Payback
0	15,000,000	3,500,000		-18,500,000	-18,500,000
1		3,200,000	5,500,000	2,300,000	-16,200,000
2		3,200,000	5,500,000	2,300,000	-13,900,000
3		3,200,000	5,500,000	2,300,000	-11,600,000
4		2,800,000	6,200,000	3,400,000	-8,200,000
5		2,800,000	6,200,000	3,400,000	-4,800,000
6		2,500,000	6,500,000	4,000,000	-800,000
7		2,500,000	6,500,000	4,000,000	3,200,000
8		2,500,000	6,500,000	4,000,000
9		2,000,000	7,000,000	5,000,000
10		2,000,000	7,000,000	5,000,000
11		2,000,000	6,200,000	4,200,000
12			6,200,000	6,200,000