- calculate the minimum payback period - calculate the NVP of the projected cash flow - calculate the internal rate of return (IRR) Expansion Project Title Project Description and Details Project Cost (Initial Investment) First-Year Cash Flow Annual Growth Rate (5 years) Expenses as a percentage of Revenues Payback Period NPV IRR Purchase of Snapple Beverage Company This would be a total acquisition of Snapple Beverage Company. This company manufactures a line of ice teas of various flavors and has a reputation for using the best materials on Earth for making their drinks. It is an established company, with owners looking to retire. They are willing to provide part-time consulting for up to one year to anyone who buys the company. $25,000,000 $8,500,000 8% 28% Year 0 Cash Flow Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flow Year 4 Cash Flow Year 5 Cash Flow Projected Revenues at an annual growth rate Projected Expenses at 28% of Revenue Annual Cash Flows Discount rate for each year (6%) Present value of cash flows The company assumes a discount rate of 6% for this project and wants the shortest payback possible period while maximizing profits.
- calculate the minimum payback period - calculate the NVP of the projected cash flow - calculate the internal rate of return (IRR) Expansion Project Title Project Description and Details Project Cost (Initial Investment) First-Year Cash Flow Annual Growth Rate (5 years) Expenses as a percentage of Revenues Payback Period NPV IRR Purchase of Snapple Beverage Company This would be a total acquisition of Snapple Beverage Company. This company manufactures a line of ice teas of various flavors and has a reputation for using the best materials on Earth for making their drinks. It is an established company, with owners looking to retire. They are willing to provide part-time consulting for up to one year to anyone who buys the company. $25,000,000 $8,500,000 8% 28% Year 0 Cash Flow Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flow Year 4 Cash Flow Year 5 Cash Flow Projected Revenues at an annual growth rate Projected Expenses at 28% of Revenue Annual Cash Flows Discount rate for each year (6%) Present value of cash flows The company assumes a discount rate of 6% for this project and wants the shortest payback possible period while maximizing profits.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- calculate the minimum payback period
- calculate the NVP of the projected cash flow
- calculate the
| Expansion Project Title | Project Description and Details | Project Cost (Initial Investment) | First-Year Cash Flow | Annual Growth Rate (5 years) | Expenses as a percentage of Revenues | Payback Period | NPV | IRR |
| Purchase of Snapple Beverage Company | This would be a total acquisition of Snapple Beverage Company. This company manufactures a line of ice teas of various flavors and has a reputation for using the best materials on Earth for making their drinks. It is an established company, with owners looking to retire. They are willing to provide part-time consulting for up to one year to anyone who buys the company. | $25,000,000 | $8,500,000 | 8% | 28% |
| Year 0 Cash Flow | Year 1 Cash Flow | Year 2 Cash Flow | Year 3 Cash Flow | Year 4 Cash Flow | Year 5 Cash Flow | |
| Projected Revenues at an annual growth rate | ||||||
| Projected Expenses at 28% of Revenue | ||||||
| Annual Cash Flows | ||||||
| Discount rate for each year (6%) | ||||||
The company assumes a discount rate of 6% for this project and wants the shortest payback possible period while maximizing profits.
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