CDE Corporation is considering an investment that has the following cash flows:($1,000,000)500,000300,000Now investmentYear 1 cash inflowYear 2 cash inflowYear 3 cash inflow200,000200.000100,000Year 4 cash inflowYear 5 cash inflowRequireda) Calculate the following:The payback periodi.The return on the initial investmentii.The present value using an interest rate of 10%(b)Is the investment worthwhile? Why?

The question is based on the concept of Financial Management.

CDE Corporation is considering an investment that has the following cash flows: Now investment ($1,000,000) Year 1 cash inflow 500,000 Year 2 cash inflow 300,000 200,000 200,000 Year 3 cash inflow Year 4 cash inflow Year 5 cash inflow 100,000

CDE Corporation is considering an investment that has the following cash flows: Now investment ($1,000,000) Year 1 cash inflow 500,000 Year 2 cash inflow 300,000 200,000 200,000 Year 3 cash inflow Year 4 cash inflow Year 5 cash inflow 100,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 13E: Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a...

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Question

CDE Corporation is considering an investment that has the following cash flows:
($1,000,000)
500,000
300,000
Now investment
Year 1 cash inflow
Year 2 cash inflow
Year 3 cash inflow
200,000
200.000
100,000
Year 4 cash inflow
Year 5 cash inflow
Required
a) Calculate the following:
The payback period
i.
The return on the initial investment
ii.
The present value using an interest rate of 10%
(b)
Is the investment worthwhile? Why?

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