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Assignment 4- Group 14.docx - 1a) NPV = Present value of...

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1a)NPV = Present value of cash inflows - Initial investment= $28,000 * Cumulative PV Factor at 14% for 10 years - $110,000= $28,000 * 5.216116 - $110,000 = $36,0511b)Payback period = Initial investment / Annual cash inflows = $110,000 / $28000 = 3.93years1c)At IRR Present value of cash inflows is equal to initial investment.$28,000 * Cumulative PV Factor at IRR for 10 years = $110,000Cumulative PV Factor at IRR for 10 years = $110,000 / $28,000 = 3.92857The PV factor falls between 21% to 22%, on intrapolation = 21.96%1d)Annual net income = Saving in cash operating cost - depreciation = $28,000 -($110,000/10)= $17,000Accounting rate of return = Average annual income / Initital investment = $17,000 /$110,000 = 15.45%1e)Accounting rate of return based on average investment = Average annual income /Average investmentAverage investment = (Initial investment + Salvage value) / 2 = $110,000/2 = $55,000Accounting rate of return = $17,000 / $55,000 = 30.91%
2) Factors City Hospital should considerQuantitative financial aspect to analyze financial marketsand securities.Qualitative factors such as improving employee morale, product quality etc.Financial factors such as expenses, incomes etc.= 15.45%2. Factors Homecare should consider include:a. Quantitative financial aspects.

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Term
Fall
Professor
NormanLeclair
Tags
Finance, Net Present Value, Household income in the United States, cumulative PV factor, Factors Homecare

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