Calculate both the NPV and IRR for each design

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Reference no: EM131398969

Fabiano Mountain Winery Company

1. Vernal's analysis is obviously some type of payback approach. Check to see if he is using it correctly by calculating the payback period (PB) for both designs. If Vernal has made a mistake, correct it.

2. Calculate both the NPV (at 12 %) and IRR for each design and then confirm the amounts provided by the accountant and the bookkeeper. (Hint: Both assumed that cost savings with the new designs are positive benefits). Also, calculate the payback, Profitability Index (PI = Present value/Cost) and the NPV/cost ratio.

3. Use your results to complete the following chart:

 

PB

NPV*

IRR

PI*

NPV/Cost

Design A:

_____

_____

31%

1.50

0.50

Design B:

_____

$33,254

_____

_____

_____

4. Shown below is Design B's NPV profile. On this same graph, plot Design A's NPV profile.

1232_Figure.png

5. Do you agree with the bookkeeper that the NPV approach favors larger projects over smaller ones? In any event, which of the two designs should be accepted? Why?

Attachment:- Assignment Files.rar

Verified Expert

The assignment involves the subject of financial management. Various terminologies like PI, NPV, IRR etc have been computed as per the requirement of the solution. The graph and tables have been accurately computed and serve the purpose of the solution.

Reference no: EM131398969

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Reviews

inf1398969

4/11/2018 5:57:22 AM

kindly explain the correct approach. e.g. if we are supposed to calculate payback period, we will use the same formula. What approach difference you can justify in this regard, I would like to know that. judge the formulas and steps to calculate the respective measure (NPV, IRR etc)Man of prudence mind would calculate the payback period and ensure the accuracy of Vernal calculation. The same has been done. calculate NPV, IRR, payback, Profitability Index (PI = Present value/Cost) and the NPV/cost ratio. the solutions are accurately done along with formulas. Are you expecting analysis in word file along with the solutions

inf1398969

4/11/2018 5:51:17 AM

This was a nice piece of work, its good enough, the answers are correct, the questions are well answered. Here are the correct answers to A & B. The answers to the questions need to be like this only and the explanation are well defined. Thank you Answers: NPV for Design A: $30,119.53 IRR for Design A: 30.8% Payback period for Design A: 2.40 PI for Design A: 1.50 NPV/Cost for Design A: 0.50 NPV for Design B: $33,253.65 IRR for Design B: 24.7% Payback period for Design B: 2.27 PI for Design B: 1.27 NPV/Cost for Design B: 0.27

len1398969

2/18/2017 2:56:00 AM

Instruction: I can write the 2-3 page word documents. Just need the spreadsheet populated and the questions 1-4 answered on the attached program deliverable. Please complete the Fabiano Mountain Winery assignment. When you return your assignment, do not return this 6-page case. Instead return a 2-3 page word document in which you (a) provide a very short summary of the case, (b) clearly identify your recommendation early, and (c) answer the questions presented in the case. In addition, include your excel file in which you develop the numerical part of your answers. I provide a sample excel file. I have created as an outline for you to follow in your solution. Feel free to use your own outline, if you prefer. So I won’t get confused, please include your name on your word document solution as well as your excel file solution. It would be best if you even include your name as part of the name of the file.

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