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The management team of Lisa s Linens & Furniture is considering the following capital projects: Project Cost Annual cash flows Years New manufacturing plant 2
The management team of Lisas Linens & Furniture is considering the following capital projects:
Project
Cost
Annual cash flows
Years
New manufacturing plant
SAR
SAR
Machinery
SAR
SAR
Leasehold improvements
SAR
SAR
Computers
SAR
SAR
Office furniture
SAR
SAR
Company plan
SAR
SAR
Company car
SAR
SAR
Assume that each project has no salvage value, and the firm uses a discount rate of Top management has decided that only SAR can be spent in the current year for capital projects.
Compute the net present value NPV profitability index, and internal rate of return for each of the projects.
Rank the projects according to each method used in Part
Explain how you would recommend to management of the company that the money should be spent. What would be the total NPV of your chosen investments?
What other methods could be used with this information to evaluate whether this project is feasible or not? How does the time value of money concept impact the cash flows and outcome?
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