mgmt2023, Business Management

A company is considering whether to purchase a piece of land that has come up for sale at a cost of $10 million. Two suggestions have been made for the use of the land. One is to construct a number of private houses for sale and the other is to construct an amusement park. The company’s management accountants have made the following estimates of both projects’ net cash flows (including the cost of the land):



Year


Private House

($ Million)


Amusement Park ($ Million)

0


-10


-10

1


-5


-8

2


+7


+4

3


+9


+6

4


+4


+8

5





+7

6





+9



The company uses NPV to evaluate projects and normally takes 10 % as a discount rate for the house-building investment and 18% as the discount rate for the amusement park. The IRR of the housing investment is 12.5% and the amusement part produces a return of 18.6%. Which is the better investment decision for the shareholders of the company? Show all calculations.

Posted Date: 3/28/2013 4:28:21 PM | Location : Jamaica







Related Discussions:- mgmt2023, Assignment Help, Ask Question on mgmt2023, Get Answer, Expert's Help, mgmt2023 Discussions

Write discussion on mgmt2023
Your posts are moderated
Related Questions
Lock-in, as explain by Hax and Wilde, is achieved when?                Ans) An company achieves a proprietary position in its business.

The major characteristics are: 1. Several jobs are combine into  one. 2. Employees make decisions ( empowerment of  employees.) decision making  becomes  part of  the job.

Question 1: Organisations operate within a business environment. Demonstrate with examples the different aspects and levels of an organisation?s environment. Question 2:

QUESTION (a) Inexperienced speakers usually make the mistake of starting to plan the introduction part first. Discuss and elaborate on the different approaches/patterns used fo

The country of Changeland has, for many years, operated as a military dictatorship. Last year, though, a people's revolution brought a democratic election for the first time in liv

Ask question #Minimum 100 words acceptedBarbara’s New Job Adapted from a case written by Glyn Jones, University of Waikato McShane, S., Olekalns, M. & Travaglione, T. (2010) Organi

QUESTION (a) What are the factors that would cause a company to continue doing business in traditional ways and avoid electronic commerce? (b) Compare e-business to e-commer

I want to make an assignment how much it cost me?

QUESTION For the success in the implementation of any business information system, one has to become familiar with the enterprise and understand its objectives in order to prod

How is Grievance defined? A Grievance may be described as any feeling of dissatisfaction or discontent, whether expressed or not expressed and whether is valid or not, occur ou