1This means that if you take the investment for 10000 today your compound

1this means that if you take the investment for 10000

This preview shows page 1 - 2 out of 3 pages.

1.This means that if you take the investment for $10,000 today, your compound average annual rate of return will be 20% per year. The true cost of capital can be as high as 20% and the investment will still have a positive NPV. IRR are indiffrenent to scale but will allow you to rank according to percetage. *use weighted averge cost or opportunity cost for discount rate if not given 1.The incremental earnings of a project comprises the amount by which the project is expected to change the Pisa Pizza's earnings. 19.Payback Period = Cost of Project / monthly Cash Inflows. Can be used in comibaition with NPV and IRR to see success of an investment. Not always accurate has the downside of no TVM, the later payments come the less it is worth. 21. a. investment A has the higher IRR 21. b. Invemnet B has the higher npv when cost of captal is at 7%. So investment b is actually the better investment because the pv of this investment is actually higher than investment a with the higher IRR 12. The FCF from the outside supplier is negative 390 thousand per year and the NVP from the outside supplier is negative $ (1,957,320). The FCF from in- house 1-9 years is negative 283,750 and FCF for the tenth year is negative 220,750. The NPV is negative $ (1,708,501). So next is to subtract the NPV to
Image of page 1
Image of page 2

You've reached the end of your free preview.

Want to read all 3 pages?

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes