Question
You are the head of the project selection team at Broken Arrow Records. Your team is considering three different recording projects. Based on past history,
You are the head of the project selection team at Broken Arrow Records. Your team is considering three different recording projects. Based on past history, Broken Arrow expects at least a rate of return of 21%. Given the following information for each project, which one should be Broken Arrow's first priority? Should Broken Arrow fund any of the other projects? (Use the NPV function in Excel to solve this problem).
Project: Time Fades Away
| Year | Investment | Revenue Stream |
| 0 | 300,000 | 0 |
| 1 | 300,000 | |
| 2 | 85,000 | |
| 3 | 20,000 | |
| 4 | 15,000 | |
| 5 | 10,000 |
Project: On the Beach
| ear | Investment | Revenue Stream |
| 0 | 200,000 | 0 |
| 1 | 200,000 | |
| 2 | 100,000 | |
| 3 | 18,000 | |
| 4 | 25,000 | |
| 5 | 11,000 |
Project: Tonight's the Night
| Year | Investment | Revenue Stream |
| 0 | 500,000 | 0 |
| 1 | 500,000 | |
| 2 | 82,000 | |
| 3 | 72,000 | |
| 4 | 22,000 | |
| 5 | 12,000 | |
Which project should be Broken Arrow's first priority? its NPV is
Which is the second most favorable project? The NPV for the second most favorable is
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Business Intelligence
Authors: Efraim Turban, Ramesh Sharda, ...more
2nd Edition
013610066X, 9780136100669
