ADMS3530-Assignment2-F10

ADMS3530-Assignment2-F10 - ADMS 3530 Fall 2010 Assignment...

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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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ADMS 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 after-tax 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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ADMS3530-Assignment2-F10 - ADMS 3530 Fall 2010 Assignment...

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