Question: solve below discounted cash flow question using NPV formulae Randy Macho Man Savage has been presented with 2 investment Opportunities and they are as follows:

solve below discounted cash flow question using NPV formulae
Randy Macho Man Savage has been presented with 2 investment Opportunities and they are as follows:
Investment 1
Pay 100,000 today for franchise
Pay 50,000 today for assets
In current period make net income 38,000
In next 3 consecutive years make 43000 net income each year.
At the end of the project sell assets and franchise for 30,000
Investment 2
Pay 55,000 for assets and license fee today
In current period net income 22,000
In next 4 consecutive make 18,000 net income each year
Nothing to sell at end of project
Assuming Mr. Savage has the cash available to start both projects and further assume that he requires a 12% return on all his investments, which of these projects should he engage with?

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!