Question
You are the CFO of a business and have the opportunity to evaluate two different investment opportunities. Information related to these investments follows: Investment 1
You are the CFO of a business and have the opportunity to evaluate two different investment opportunities. Information related to these investments follows:
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| Investment 1 | Investment 2 |
| Investment Cost | $ 800,000 | $ 500,000 |
| Salvage Value | $ 40,000 | $ 50,000 |
| Useful Life | 8 years | 15 years |
| Required Rate of Return | 10% | 10% |
| Sales | $ 450,000 | $ 400,000 |
| Variable Costs | $ 150,000 | $ 175,000 |
| Fixed Costs (excluding depreciation) | $ 100,000 | $ 150,000 |
| Tax Rate | 35% | 35% |
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Your company has a required rate of return of 10% for all new investments and is subject to a tax rate of 35%.
- Calculate the Net Present Value for each investment using the NPV function in Excel.
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Auditing Humor And Other Oxymorons
Authors: Mr Mike Jacka
1st Edition
0991280903, 978-0991280902
