In: Finance
Simply Chocolate Company is considering two possible expansion plans.Proposal X involves opening five stores in North Carolina at a cost of $2,400,000. Under Proposal Y, the company would focus on Virginia and open six stores at a cost of $3,000,000. The following information is given for the two proposals:
Proposal X Proposal Y
Required investment $2,400,000 $3,000,000
Estimated life 10 years 10 years
Estimated residual value $200,000 $200,000
Estimated annual net cash flows $450,000 $580,000
Required rate of return 14% 14%
Based on the above following problem, Required: for each proposal, you are asked to calculate
a. Pay back Period
b.Accounting Rate of Return
c.Net Present Value
d.Profitability Index