Question: if I learned the below topic in my course could help me with answer this question please with depth analysis not just send to me

if I learned the below topic in my course could help me with answer this question please with depth analysis not just send to me the simple answer

Domestic Robots R Us (DRRU), a subsidiary of AI Electronics Inc, are considering three new robots for their offering of AI driven domestic robots. Unfortunately, DRRU are subject to tight capital constraints, preventing them from putting all three robots into production should all three robots prove to create shareholder value. Indeed, the maximum investment DRRU can make this year is $55 million.

DRRUs cost of capital is 12% and the management are confident that each of the three robots or projects has the same risk as DRRUs existing projects.

  1. Observing the below annual cash flows, what do you notice? Based on what I have learnt so far, what should immediately be a matter of concern? Check whether your concern is justified.

what i Learned

Introduction to Investment Appraisals

NPV of a Project Projects Repeated Over Time Capital Rationing Net Present Value Choosing Capital Investments

Internal Rate of Return The Payback Method The Internal Rate of Return Rule The Payback and Accounting Rate of Return Rules

Forecasting a Project's Cash Flows

Robot/Year 0 1 2 3 4 5 6 7 8
Gardner Gaby (GG) -30.00 12.00 12.87 13.77 14.73 15.77 16.87 18.05 -75.00
Nanny Natalie (NN) -30.00 6.05 6.66 7.32 8.05 8.86 9.74 10.72 11.79
Cook Claudio (CC) -25.00 5.25 5.59 5.95 6.34 6.75 7.19 7.66 8.16

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!