Net present Value
For this assignment, refer to the scenario located in “Problems – Series A” section 10-19A of Ch. 10, “Planning for Capital Investments” of Fundamental Managerial Accounting Concepts. This scenario puts you at the task as a Senior Accountant for Donovan Enterprises to identify the preferred method and best investment opportunity for the company.
Read the scenario in the textbook and complete the activity below.
Dwight Donovan, the president of Donovan Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest 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 cash inflows are $126,000 for Project A and $52,800 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Donovan Enterprises’ desired rate of return is 8%
Required:
Use Microsoft® Excel®—showing all work and formulas—to compute the following:
Create a PowerPoint® presentation showing the comparison of the net present value approach with the internal rate of return approach calculated above. Complete the following in your presentation:
Cite references to support your assignment.
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