Purchase Solution

Internal Rate of Return in Cash Flow Estimation

Not what you're looking for?

Ask Custom Question

Pinehill Medical Associates (PMA) wants to expand. The medical group can acquire an open former medical facility nearby for $150,000 and will need an additional $50,000 for renovations with a total mortgage of $200,000. The payment will be $1050 per month for 30 years. Another option is to build a new facility for $250,000 and with monthly mortgage payments of $1100. The discount rate for both projects is 10%. The cost of capital is 15%. (See attached file for table).
• Determine which scenario would be the best option for the group over the next five years in terms of Internal Rate of Return (IRR).
• Write an interpretation of your findings and submit as a WORD document.

Purchase this Solution

Solution Summary

The expert determines the real net present value of two investment opportunities anyhow to interpret their potential

Solution Preview

We are given two potential options for financing a building, presumably to afford the firm the ability to increase income over the next several years. The financial principle involved is time value of money - we are being asked to determine the net present value of the future income, then we need to discount it back to the present in order to gain a firm understanding of the REAL amount available from an investment perspective.

See spread sheet attached, it breaks down the calculations for each ...

Purchase this Solution

Free BrainMass Quizzes
Operations Management

This quiz tests a student's knowledge about Operations Management

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.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

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.

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.