Caledonia -Integrative Problem
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April 11, 2011
No of pages / words:
3 / 690
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What is each project’s payback period?
B. What is each project’s net present value?
C. What is each project’s internal rate of return?
D. What has caused the ranking conflict?
E. Which project should be accepted? Why?
F. Describe the factors that Caladonia would have to consider if they were doing a lease versus buy for the two projects...
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Which project should be accepted? Why?
F. Describe the factors that Caladonia would have to consider if they were doing a lease versus buy for the two projects.
Payback period is defined as the expected number of years required to recover the original investment.
Period 0 1 2 3 4 5
Net cash flow -100,000 32,000 32,000 32,000 32,000 32,000
Cumulative NCF -100,000 -68,000 -36,000 -4,000 28,000 60,000
Payback = Year before full recovery + Unrecovered cost at start of year
Cash flow during year
= 3 + 4,000/32,000 = 3...
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