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A manager of the engineering department of Manchester University

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Question;11-A2.;A manager of the engineering department of Manchester University is contemplating acquiring 120 computers. The computers will cost $240,000 cash, have zero terminal salvage value, and a useful life of 3 years. Annual cash savings from operations will be $110,000. The required rate of return is 14%. There are no taxes.;1. Compute the NPV.;2. Should the engineering department acquire the computers? Explain;11-37;City View Restaurant is about to open at a new location. Operating plans indicate the following expected cash flows;Outflows Inflows;Initial investment now $235,000 $ ------;End of year: 1 $150,000 $200,000;2 $200,000 $250,000;3 $250,000 $300,000;4 $300,000 $450,000;5 $350,000 $500,000;1. Compute the NPV for all these cash flows. This should be a single amount. Use a discount rate of 14%.;2. Suppose the minimum desired rate was 12%. Without further calculations, determine whether the NPV is positive or negative Explain.

 

Paper#50814 | Written in 18-Jul-2015

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