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
Leadership: In the 21 Indisputable Legislation of Leadership, John Maxwell sums up his interpretation of leadership as "leadership is sway - nothing extra, nothing fewer." Thi

Describe any situation in your experience where the communication was a failure. Analyze the barrier(s) which stood in the way of successful communication. Explain how you would ov

notate commendation to pmc

As the name suggest corrective maintenance occurs when there is a work stoppage because of machine breakdown. In this sense maintenance becomes repair work. Repairs are

In today's fast-paced work environment a successful organisation is one where diversity is the norm and not the exception. It is the approach to diversity, not the diversity itself

Synthetic Auto Insurance is trying to decide how much money to keep in liquid assets to cover insurance claims. In the past, the company held some of the premiums it received in in

QUESTION 1 (a) Elaborate on the recent developments in communication theory as a field of research and study. (b) Elaborate on three main communication theories that mark th

Example: You  are given  the followings  information in regard to an item: Annual usage     = 20,00 units. Ordering cost     = Rs. 160 per order  Carrying cost    = 20 % o

Solar and Wind Energy for India and Pakistan - Case study and business plan I want a case study and full business plan about installing solar power systems and wind energy for

How is the communication affected in the organisation? Communication: Communication serves like a linking process by through parts of an organization are tied together. G