2 investors go to start very similar projects.

Investor 1 buys land for 25 million to start a company to build boats for 160,000 each. The company makes 10 boats a month for 5 years and sells these boats 3 months are being produced for 250,000. It is assumed that the effective interest rate is 10% per annum.

Investor 2 buys identical land to start a rival company, also for 25 million and also makes 10 boats a month also for 5 years. However the cost to make these boats start at 160,000 each but after the first month, the cost increases monthly in line with an assumed inflation rate of 3% per annum effective. The sale cost remains at 250,000

As it takes 3 months to sell the boats the last sale is made 5 years and 3 months after production begins.

For both projects, calculate the accumulated value at the time the final cars are sold, The DPP (discount payback period) and the IRR (internal rate of return).

Answer rating: 100% (QA)

2 Investors go to start very similar projects Investor 1 Accumulated Value The accumulated value at the time the final cars are sold for Investor 1 is 41633326 This can be calculated by adding up the ... View the full answer