Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each of the last three years. Casey is considering a capital budgeting project that would require a $3,500,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company’s discount rate is 16%. The project would provide net operating income each year for five years as follows: Sales $3,400,000 Variable expenses 1,600,000 Contribution margin 1,800,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $700,000 ?Depreciation 700,000 Total fixed expenses 1,400,000 Net operating income $400,000 I need these questions answered in excel please and the calculations shown wold be of great help for me and learning this question Required: What is the project’s net present value? What is the project’s internal rate of return to the nearest whole percent? What is the project’s simple rate of return? Would the company want Casey to pursue this investment opportunity? Would Casey be inclined to pursue this investment opportunity? Explain.
Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each of the last three years. Casey is considering a capital budgeting project that would require a $3,500,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company’s discount rate is 16%. The project would provide net operating income each year for five years as follows: Sales $3,400,000 Variable expenses 1,600,000 Contribution margin 1,800,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $700,000 ?Depreciation 700,000 Total fixed expenses 1,400,000 Net operating income $400,000 I need these questions answered in excel please and the calculations shown wold be of great help for me and learning this question Required: What is the project’s net present value? What is the project’s internal rate of return to the nearest whole percent? What is the project’s simple rate of return? Would the company want Casey to pursue this investment opportunity? Would Casey be inclined to pursue this investment opportunity? Explain.
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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Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division’s
| Sales | $3,400,000 | |
| Variable expenses | 1,600,000 | |
| Contribution margin | 1,800,000 | |
| Fixed expenses: | ||
| Advertising, salaries, and other fixed out-of-pocket costs | $700,000 | |
| ? |
700,000 | |
| Total fixed expenses | 1,400,000 | |
| Net operating income | $400,000 |
I need these questions answered in excel please and the calculations shown wold be of great help for me and learning this question
Required:
- What is the project’s
net present value ? - What is the project’s
internal rate of return to the nearest whole percent? - What is the project’s simple rate of return?
- Would the company want Casey to pursue this investment opportunity? Would Casey be inclined to pursue this investment opportunity? Explain.
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