For this assignment, you will be given three scenarios and you must calculate the ROI using the payback period, net present value, and internal rate of return.
Once you have performed the calculations, you are to write a memo to your boss explaining the scenarios, the results of each, and your selection.
In each scenario, you are presenting an idea to your boss to purchase a new piece of equipment for $15,000 that will bring in cash flows. There are different machines that can produce more and some that produce less. You have done your analysis and have figured that in
Scenario 1
The cash flows from the $15,000 investment will be $6,000 per year for three years
Scenario 2
The cash flows from the $15,000 investment will be $4,500 per year for three years
Scenario 3
The cash flows from the $15,000 investment will be $5,800 per year for three years.
The life expectancy of the machine is 3 years.
The discount rate is 7%.
For each scenario, you are to calculate the Payback Period, Net Present Value, and Internal Rate of Return. Once you have performed the calculations, you are to write a memo to your boss advising him of what you think the best investment will be.
The paper should be in memo format and include:
Introduction – inform your boss of the analysis you have undertaken.
Results – provide your boss with the results of the three ROI methodologies.
Recommendation – provide your boss with the recommended scenario.
Conclusion