Question
The Dallas Cowboys, an important NFL football team is considering three different investment scenarios to improve their training facilities. The estimated cash flows for each
The Dallas Cowboys, an important NFL football team is considering three different investment scenarios to improve their training facilities. The estimated cash flows for each scenario are as follows:
Scenario A: Initial Investment: $290,000// Cash Flows: $100,000 per year for 5 years
Scenario B: Initial Investment: $480,000 // Cash Flows: $200,000 per year for 3 years
Scenario C: Initial Investment: $431,000 // Cash Flows: $300,000 per year for 2 years
The team's required rate of return is 10%. The team's financial manager decides to evaluate the Net Present Value (NPV) profile for each scenario to determine the best investment option.
a) Calculate and graph NPV profiles considering discount rates of -1% (loss); 0%; 10% and IRR, FOR EACH investment.
b) Finally, decide and mention: Which investment would you choose based on the analysis? Explain your selection.
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