Assignment Content

Page $1$ of $2$

NOTE: For this project you must submit documents supporting your answers in the submission section $-$ showing step$-$by$-$step how you reached your answers. You can use excel to find the IRR only. Everything else must be shown as a calculation.

Module $4$ Assignment

You, as the project manager, have been asked to recommend which project your company should move forward with. Your company has a total of $$350,000$ in debt at $5\%$ interest and $$400,000$ in equity at $12\%$ rate of return.

Project $1$ is to build a medium$-$sized garage for a client over three years. The client will pay $$10,000$ as a deposit immediately, $$40,000$ the year after and $$85,000$ in the final year. Your company has a small loan of $$10,000$ with $5\%$ interest to go towards this project that must be paid back in the end. $$50,000$ of materials will be bought all at once in the first year. As well as a piece of equipment that requires a $$10,500$ down payment and yearly payments of $$1500$ following. Labor for the project is $$15,000$ immediately and $$6000$ per year after. Administration costs including taxes are $$4000$ for set up and $$1000$ per year after.

Project $2$ is the purchase and installation of a new piece of equipment for your company with a life span of $3$ years. The equipment costs $$50,000$ up front and $$9,000$ to run in the following years. You have the same sources of funding $($loan and investor's equity$)$ and administration costs as project $1.$ The equipment will save your company $$25,000$ beginning the year after installation and has a salvage value of $$12,000$ at the end of its lifespan.

Question $2$

a$)$ How much is the initial $($net$)$ investment of the company for project $1?$

Answer: $ Blank $1$

Blanl

Question $3$

b$)$ How much is the initial $($net$)$ investment of the company for project $2?$

Answer: $ Blank $1$

Blank $1$

Add your answer