Module 6- Critical Thinking.docx - FIN 300 Principle of...

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FIN 300 Principle of Finance for the Private Sector Galaxy Satellite Co. Galaxy Satellite Co. FIN 300 Principle of Finance for the Private Sector Colorado State University – Global Campus John Wetherington October 17 th , 2017 Galaxy Satellite Co. 1
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FIN 300 Principle of Finance for the Private Sector Galaxy Satellite Co. Project PV inflows Initial Investment NPV IRR Cost of Capital A 3,050,000 3,000,000 50,000 21% 20% B 9,320,000 9,00,000 320,000 25% 20% C 1,060,000 1,000,000 60,000 24% 20% D 7,350,000 7,000,000 350,000 23% 20% 1. Projects C and D would maximize the NPV. They will generate a maximum NPV of $410,000 with only a $8,000,000 investment. With the budget of 10,000,000 invest in project C at 1,000,000 at 24% with a NPV of 60,000 and project D at 7,000,000 at 23% with a NPV of 350,000. 2. Using the IRR method, the best investments are the ones with the IRR with a 23.5% or more return required. With that in mind, project B and C meet these criteria. Project B is an investment of 9,000,000 at 25% and Project C is an investment of 1,000,000 at 24%. The combination still is within the budget of 10,000,000 and are above the IRR of 23.5%.
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