The Web site www.mhhe.com/bma contains an Excel program for calculating the profitability of the Nodhead project. Now
Question:
The Web site www.mhhe.com/bma contains an Excel program for calculating the profitability of the Nodhead project. Now suppose that the cash flows from Nodhead’s new supermarket are as follows:
a. Recalculate economic depreciation. Is it accelerated or decelerated?
b. Rework Tables 12.2 and 12.3 to show the relationship between
(i) The “true†rate of return and book ROI and
(ii) True EVA and forecasted EVA in each year of the project’slife.
Transcribed Image Text:
TABLE 12.2 Year 2 3 4 5 Cash flow Book value at start of yea 1,000 Book value at end of year 834 Book Book income Book ROI EVA 100 298 834 667 167 667 167 167 167 131 167 67 -0.067 167 167 83 167 131 167 130 ation 0.263 81 0.040 0.125 0.394 0.782 TABLE 12.3 Year Cash flow PV at start of year PV at end of year Economic dep Economic income Rate of return EVA 298 740 250 1,000 1 1,000 1,000 3 740 224 246 52 0.10 0.00 0.10 0.00 0.10 0.00 0.10 0.00 0.10 0.00 0.00
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Use the models from Tables 122 and 123 below to answer these questions TABLE 122 Forecasted book ROI ...View the full answer
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Related Book For
Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
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