Capital Investment Analysis
Gyro Corporation is considering two investment projects, each of which will cost $1,340,000. The estimated cash flow for each project is as follows.
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Retail
Plant
Store
Year
Expansion
Expansion
1
450,000
500,000
2
450,000
400,000
3
340,000
350,000
4
280,000
250,000
5
180,000
200,000
Total
1,700,000
1,700,000
The company has decided that a 10% discount rate is appropriate for each project.
Required:
Calculate the payback period for each project.
Calculate the Net Present Value (NPV) of each project.
Advise management on which, if either, project to pursue and why.
Use an Excel spreadsheet for your answers.
You need to do deep and clear analysis.
Show your work by writing the formulas.
Follow the instructions carefully.
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