Project Management Assignment | Homework Help Websites
AGEC 480
Homework #2
You will enter your answers via a quiz format
- Consider the following information in choosing among the four project alternatives below (labeled A, B, C, and D). Each has been assessed according to four criteria:
- Payoff potential
- Lack of risk
- Safety
- Competitive advantage
Project A is rated:
Payoff potential high
Lack of risk low
Safety high
Competitive advantage medium
Project B is rated:
Payoff potential low
Lack of risk medium
Safety medium
Competitive advantage medium
Project C is rated:
Payoff potential medium
Lack of risk medium
Safety low
Competitive advantage low
Project D is rated:
Payoff potential high
Lack of risk high
Safety medium
Competitive advantage medium
- Assume that your firm wants to choose between two project options:
- Project A offers the following opportunity: $500,000 invested today will yield an expected income stream of $150,000 per year for 5 years.
- Project B requires an initial investment of $400,000, but its expected revenue stream is: Year 1 = 0, Year 2 = $50,000, Year 3 = $200,000, Year 4 = $300,000, and Year 5 = $200,000.
Assume that a required rate of return for your company is 10% and that inflation is currently expected to remain steady at 3% for the life of the project. Which is the better investment? Why?
4.Your Vice President for MIS informs you that she has researched the possibility of automating your organization’s order-entry system. She has projected that the new system will reduce labor costs by $30,000 each year over the next five years. The purchase price (including installation and testing) of the new system is $110,000.
What is the Net Present Value of this investment if the discount rate is 10% per year?
