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MBA 737 Hinson Assignment 3-2

# MBA 737 Hinson Assignment 3-2 - MBA 737 Assignment 3-2...

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MBA 737 Assignment 3-2 Graded Problems for Week 3 Jamie Hinson 10-Oct-10 1) a) Payback period Project A Project B Payback period = Base year + Balance required cash flow of the year where as Base year + 1 2 Balance required 3500 300 cash flow of the year 4000 2800 Payback period = 1.88 Years 2.11 Years Conclusion:- We should undertake the project A coz its Payback period is Less than two years b) Computation of the Net Present Value Years Cash flows A Cash flows BDisouct @ 15% PV A 0 -8500 -6400 1 (\$8,500.00) 1 5000 3100 0.87 \$4,347.83 2 4000 3000 0.76 \$3,024.57 3 1500 2800 0.66 \$986.27 Net present value (\$141.32) Conclusion:- We should undertake the project B coz its NPV is More than Project B 5) a) Average Book Value = (Book Value0 + Book Value1 + Book Value2 + Book Value3 + Bo (\$28,000 + \$21,000 + \$14,000 + \$7,000 + \$0) / (5 years) \$14,000 Average Project Earnings = \$4,500 Divide the average project earnings by the average book value of the machine to calculate the average Average Accounting Return = Average Project Earnings Average Book Value Where as Average Project Earnings \$4,500 Average Book Value \$14,000

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Average Accounting Return = 32.14%
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