(M1)
Dwight Donovan, the president of Donovan Enterprises, is considering 2 investment opportunities. Because of limited resources, he will be able to invest in only one of them.
Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $400,000 and for Project B are $160,000. The annual expected
Both investments are expected to provide cash flow benefits for the next four years. Donovan Enterprises’ desired
Use Excel®—showing all work and formulas—to compute the following:
• The net present value of each project. Round your computations to 2 decimal points.
• The approximate internal rate of return for each project. Round your rates to 6 decimal points.
Synthesize results of analyses and computations to determine the best investment opportunity to recommend to the president of Donovan
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