Answered step by step
Verified Expert Solution
Question
1 Approved Answer
sation Paper.pdf Capital Appraisal 1. The Rolls Construction Company specializes in developing large shopping centres. The company is considering the purchase of a new earth-moving
sation Paper.pdf Capital Appraisal 1. The Rolls Construction Company specializes in developing large shopping centres. The company is considering the purchase of a new earth-moving machine and has gathered the following information: Purchase Price $600,000 Residual Value $100,000 Desired payback period 3 years Minimum rute of return 15% The cash flow estimates are as follows: Year 1 Cash Inflows $500,000 Cash Outflows $260,000 Net Cash Intlows $240,000 Projected Net Income $115,000 2. 450,000 240,000 210,000 85,000 3 400,000 220,000 180,000 55,000 4 350,000 200,000 150,000 25,000 Totals 1,700,000 920,000 780,000 280,000 (PVIFA & PIF Tables are attached) Required: a) Analyze the Rolla Construction Company's investment in the new earth-moving machine. In your analysis, use i the net present value method, (12 Marks) the payback period method. (7 Marks) b) Determine the internal rate of return (16 Marks) c) Summarize your findings from 1 above, and recommend a course of action. (5 Marks) Total (40 Marks) il
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