Capital Budgeting on Excel
Not what you're looking for?
Three Rivers Company runs clothing stores in the Pittsburg area. Three Rivers' management estimates that if it invests $250,000 in a new computer system, it can save $75,000 in annual cash operating costs. The system has an expected useful life of ten years and no terminal Disposal value. The required rate of return is 8%. Ignore income taxes and assume all cash flows occur at year-end except for initial investment amounts to calculate the following:
1. Net present value
2. Payback period
3. Discounted payback period
4. Internal rate of return (using the interpolation method)
5. Accrual accounting rate of return based on the net initial investment (assume straight-line depreciation)
6. What other factors should Three Rivers consider in deciding whether to purchase the new computer system?
7. Should they purchase the new system? Why or why not?
Please show work in excel
Purchase this Solution
Solution Summary
Three Rivers Company runs clothing stores in the Pittsburg area. Three Rivers' management estimates that if it invests $250,000 in a new computer system, it can save $75,000 in annual cash operating costs. The system has an expected useful life of ten years and no terminal Disposal value. The required rate of return is 8%. Ignore income taxes and assume all cash flows occur at year-end except for initial investment amounts to calculate the following:
1. Net present value
2. Payback period
3. Discounted payback period
4. Internal rate of return (using the interpolation method)
5. Accrual accounting rate of return based on the net initial investment (assume straight-line depreciation)
6. What other factors should Three Rivers consider in deciding whether to purchase the new computer system?
7. Should they purchase the new system? Why or why not?
Purchase this Solution
Free BrainMass Quizzes
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.