Situation: Assume that you are planning to invest for the expansion of your business. You consider the two projects: large expansion which costs PHP 1,100,000 and medium expansion which costs PHP500,000. The discount rate is 8% annually. You are task to do the following. Also, you interpret your result (for problem solving). 1 -ancion 4. Calc 5. sion 6. Calculate the Profitability Index for Medium Expansion 7. Calculate the Payback period for Large Expansion 8. Calculate the Payback period for Medium Expansion 9. Create an Evaluation Summary indicating the NPV, IRR, PI, and Payback period of all options. Please see the PDF lecture notes or lecture video for the guide. 10. Based on the NPV, IRR, PI, and Payback period of each project option, what is the best option for the expansion of your business? Discuss your answer. Project A Large Expansion PHP 1,100,000 Project B Medium Expansion PHP 500,000 Particulars Initial Investment Outlay Cash Inflows Year 1 PHP 250,000 PHP 300,000 PHP 350,000 PHP 400,000 PHP 100,000 PHP 120,000 PHP 150,000 Year 2 Year 3 Year 4 PHP 170, 000

Situation: Assume that you are planning to invest for the expansion of your business. You consider the two projects: large expansion which costs PHP 1,100,000 and medium expansion which costs PHP500,000. The discount rate is 8% annually. You are task to do the following. Also, you interpret your result (for problem solving). 1 -ancion 4. Calc 5. sion 6. Calculate the Profitability Index for Medium Expansion 7. Calculate the Payback period for Large Expansion 8. Calculate the Payback period for Medium Expansion 9. Create an Evaluation Summary indicating the NPV, IRR, PI, and Payback period of all options. Please see the PDF lecture notes or lecture video for the guide. 10. Based on the NPV, IRR, PI, and Payback period of each project option, what is the best option for the expansion of your business? Discuss your answer. Project A Large Expansion PHP 1,100,000 Project B Medium Expansion PHP 500,000 Particulars Initial Investment Outlay Cash Inflows Year 1 PHP 250,000 PHP 300,000 PHP 350,000 PHP 400,000 PHP 100,000 PHP 120,000 PHP 150,000 Year 2 Year 3 Year 4 PHP 170, 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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