Organization Strategy and Project Selection, business and finance homework help

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Business Finance

Project Management

Description

  • Use Microsoft Excel (required).
  • Place all responses on one document (one file different tabs in Excel). **ALL CELLS MUST HAVE FORMULAS- NO FORMULAS NO POINTS AWARDED***
  • Show work for all questions (within Excel)

Answer the following questions for this week’s homework assignment.

  1. Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint? Why?
  2. A five-year project has a projected net cash flow of $15,000, $25,000, $30,000, $20,000, and $15,000 in the next five years. It will cost $50,000 to implement the project. If the required rate of return is 20 percent, conduct a discounted cash flow calculation to determine the NPV.
  3. You work for the 3T company, which expects to earn at least 18 percent on its investments. You have to choose between two similar projects. Your analysts predict that inflation rate will be a stable 3 percent over the next 7 years. Below is the cash flow information for each project. Which of the two projects would you fund if the decision is based only on financial information? Why?

Helpful Links:

Caluclating payback in Excel:

https://www.youtube.com/watch?v=mYgj5wiNS_U

https://www.youtube.com/watch?v=NwSmUDvWTPA

Calculating NPV:

https://www.youtube.com/watch?v=DXUWonEMfB0

https://www.youtube.com/watch?v=qAhV3xG0i8s

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Explanation & Answer

find attached

Question No # 01

Two new software projects are proposed to a young, start-up company. The Alpha project will
cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta
project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000.
The company is very concerned about their cash flow. Using the payback period, which project
is better from a cash flow standpoint? Why?

Payback Period

1

Project Alpha
Project Alpha
Project Alpha

2

Project Beta
Project Beta
Project Beta

Investment

Annual Savings
$150.000
$40.000
$3,75
3.75 Years

$200.000
$50.000
4,00
4.00 Years

By calculating th...


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