William's Pharmaceutical: Calculate NPV, IRR, profit index
Not what you're looking for?
I need help getting started with the following:
The management at William's Pharmaceutical is considering new computers and equipment to manage inventory and to expedite online orders and product shipment. The investment will be $100,000 and the cost of capital is 15%. The company earned $500,000 in sales last year and anticipates the new equipment could increase sales by $50,000 in the first year, $60,000 in the second and third years, and $70,000 in the fourth and fifth years.
I have to write a recommendation of my understanding of capital budgeting. Some assistance interpreting the following would be greatly appreciated:
- Based on the discounted payback period, would the investment produce a profit within five years?
- Calculate the NPV, the IRR, and profitability index (PI) for the project
- Use your calculations to make recommendations concerning the potential profitability of this investment.
Purchase this Solution
Solution Summary
Your tutorial is in Excel (attached) and includes a conclusion and a reference on this capital budgeting problem.
Solution Preview
I would accept the project. It generates a healthy net present value meaning that the present value of the future cash flows discounted at 15% exceeds the ...
Education
- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
Recent Feedback
- "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
- "Thank, this is more clear to me now."
- "Awesome job! "
- "ty"
- "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Operations Management
This quiz tests a student's knowledge about Operations Management
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.