ADMS 3530 Fall 2010
Assignment #2
1
ADMS3530
Assignment #2
Fall 2010
Instructions:
(1) This assignment is to be done individually.
You must sign and submit the standard
cover page supplied as the last page of this assignment
.
(2) Before you start, please read the note “
Writing Style Required for ADMS3530
Assignments
” posted on the course website. Please stick to the writing guidelines
suggested in the note.
(3) This assignment is
due in class
in the
week of November 29, 2010
.
Internet students
must upload their assignment as per Course Kit instructions by
Wednesday, December 1 at 10pm or drop off a hard copy of their assignment to
Atkinson #282 by the Wednesday deadline.
(4) This assignment must be
handwritten.
Work that is too difficult to read due to
messiness and poor handwriting will receive zero credit. You must show your work to
receive full credit.
(5) This assignment is worth a total of 100 marks.
(6)
Late assignments will not be accepted for any reason.
(7) Decimal places: please keep at least 4 in your calculations and 2 in your final
answers.
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View Full DocumentADMS 3530 Fall 2010
Assignment #2
2
Question 1  NPV
(20 marks)
Ashley Company is considering a project that requires an investment of $12,000 today.
It
estimates that expected future aftertax cash inflows will be $5,000 in years 1 & 2 and
$8,000 in year 3.
The companies required rate of return on similar projects is 15%.
Based on the above, please answer the following questions.
(a) Would you accept this project if you used NPV as your decision criteria? (4 marks)
(b) Would you accept this project if you used IRR as your decision criteria? (4 marks)
(c) Would you accept this project if the company requires a payback period of 2 years for
all projects.
Also calculate the payback period of this project. (4 marks)
(d) Would you accept this project if the company requires a
discounted
payback period
of 2 years for all projects.
Also calculate the
discounted
payback period of this project.
(4 marks)
(e) What criteria would you use if your capital for the initial investment is limited and you
had to choose between multiple projects that all had positive NPVs?
What would the
calculation be for this particular project? (4 marks)
Question 2 – DCF Analysis  Microlight Project
(20 marks)
To compete with Research in Motion's and Apple's tablets, Microsoft has introduced the
"Microlight", an ultra light gaming platform for publishers and players. Owners can use
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 Spring '09
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 Capital Asset Pricing Model, Net Present Value

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