Cost benefit analysis CanGo

1095 Words Sep 26th, 2014 5 Pages
DeVry University
Accounting 460
Professor: Ivy Bennett
Group: B
Veronica Guajardo
Annie Lee
Isolina Pagan

Cost Benefit Analysis

VIA Consulting has been hired in CanGo’s behalf to assist its management group in the decision making of the implementation of the new operating ASRS system, and we came out with the following financial information and data.
CanGo started operating as a small company in 2006. In 2008 the company reported a net profit of $7,000,000 and $15,000,000 for the 2009. The company’s most profitable division has been its online book sale. Due to the fact that CanGo has been increasing its sales and revenue for more than 100%, the company has demonstrate that it is a profitable organization, but at the
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Salaries expense and machinery and equipment would be the company’s cash outflow. The cash outflow is $2,250,000.
NPV= 58,000,000- 2,250,000 =55,750,000
Projects with a positive NPV add value to the firm.

Cash inflows and outflows can occur at any time during the project. The NPV of the project is the sum of the present values of the net cash flows for each time period t, where t takes on the values 0 (the beginning of the project) through N (the end of the project).
With this formula we can also calculate the time and the amount of money the capital invested in the project will have generate profits.

The NPV calculation provides a dollar measure of how much a project is expected to add to a firm 's value. Analysts may also want to know what the rate of return on a project is in order to compare it to the cost of capital. This rate is called the internal rate of return, or IRR.
The IRR is the discount rate that makes the present value of the cash inflows equal to the present value of the cash outflows. This is the same as saying that the IRR is the discount rate that makes the net present value equal to zero.
The formula that represents the IRR is

In conclusion, and taking into consideration the financial data of Divisional Revenues from 2009 for $58,000,000 and cash outflow of $2,250,000 to 3,000,000 (ASRS equipment,

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