Unformatted text preview: 28.41% c) Compute the simple and discounted payback periods for this alternative. Simple: Year 2 Cumulative is 300,000 Discounted: Year 2 Cumulative is 70,247 (if MARR = 10%) Discounted: Year 2 Cumulative is -230k (if MARR = 28%) Problem 2: A venture capitalist was given a business prospectus (business proposal) which had the following details: Start-up Cost 1,000,000 Expected Useful Life of the Business 4 Years Salvage Value (resale at end of Useful Life 500,000 Estimated Annual Revenues per Year. 600,000 Total Operating Cost per Year 200,000 The VC has an option to just invest in his real estate business which will earn him 15% per year. He also adds an additional 10% for the risk of this new business venture, totalling his MARR to 25%. Evaluate the deal using the ERR Method. i = 25.71 OR 22.14%...
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- Spring '11