enager case - Sarah Pakravan SID 23682613 LEC 3:30-5:00 PM ENAGER INDUSTRIES CASE 1 Mr Hubbard requires that new investment proposals have a return of

enager case - Sarah Pakravan SID 23682613 LEC 3:30-5:00 PM...

This preview shows page 1 out of 1 page.

Sarah Pakravan SID: 23682613LEC: 3:30-5:00 PMENAGER INDUSTRIES CASE1.)Mr. Hubbard requires that new investment proposals have a return of at least 15% in order for them to be accepted. Under this rule, Sarah McNeil’s proposal was correctly rejected because it did not meet the minimum necessary return.ROA= EBIT/total assets= $390,000/$3,000,000= 13%2.)0= [Ct/(1+r)^t]-C0 where r= the internal rate of return The internal rate of return of the company is 12%, meaning that when a project’s ROA is 12% the NPV of that project is $0. Given that the return of Sarah’s projectis 13% and is higher than the internal rate of return, we can infer that this project is actually rather desirable because it increases the value of Enager and therefore should have been accepted rather than rejected.3.)As in the case of rejecting this project when it should have been accepted, we can infer that their capital budgeting and performance evaluation methods are

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture