Question
In: Economics
A. Explain the net present value and return on investment for a cost–benefit analysis. Why would...
A. Explain the net present value and return on investment for a cost–benefit analysis. Why would these calculations be used?
B. What is an evolutionary WBS? How does it address the problems associated with a conventional WBS?
Solutions
Expert Solution
A. Net present value : It is the cumulative present worth of positive and negative investment cash flow using a specified rate to handle the time value of money.
Net present value for cost-benefit analysis uses a discount rate, determined from the company's cost of capital to establish the present value of a project . Discount rate is used to determined the present value of both cash outlays and receipts.
Return on investment - It is th ratio of net cash receipts of the project to the cash outlays of the project. Trade-off analysis can be made among projects competing for investment by comparing their representative return on investement ratios.
These calculations would be used for investment purposes.
B. Evolutionary Work Breakdown Structures (WBS) should organize the planning elements around the process framework rather than the product framework. It allows the analyst to address all the problems by allowing the development of an iterative work plan. Evolutionary WBSs are organised in a standard manner across all projects y workflow, phases and the specific tasks that are accomplished during an individual iteration. This decouples the structure of an evolutionary WBS from the structure of the design of the product and prevents committing to a specific architecture of a new system.
Rahul Sunny answered 2 years agoRelated Solutions
between net present value rule used in cost benefit analysis and benefit-ratio used in cost-effectiveness analysis....
between net present value rule used in cost benefit analysis and
benefit-ratio used in cost-effectiveness analysis. Why do most
economists choose net present value rule?
fix
：“benefit ratio ” is “benefit-cost ratio”
The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are...
The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Cold Goose Metal Works Inc.:
Last Tuesday, Cold Goose Metal Works Inc. lost a portion of its
planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Omicron is 13.2%, but he can’t...
The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are...
The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Blue Hamster Manufacturing Inc.:
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of
its planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Lambda is 11.3%, but he can’t recall how...
Average Rate of Return Method, Net Present Value Method, and Analysis The capital investment committee of...
Average Rate of Return Method, Net Present Value Method, and
Analysis
The capital investment committee of Ellis Transport and Storage
Inc. is considering two investment projects. The estimated income
from operations and net cash flows from each investment are as
follows:
Warehouse
Tracking Technology
Year
Income from
Operations
Net Cash
Flow
Income from
Operations
Net Cash
Flow
1
$58,000
$190,000
$122,000
$304,000
2
58,000
190,000
93,000
257,000
3
58,000
190,000
46,000
181,000
4
58,000
190,000
20,000
124,000
5
58,000
190,000...
Average Rate of Return Method, Net Present Value Method, and Analysis The capital investment committee of...
Average Rate of Return Method, Net Present Value Method, and
Analysis
The capital investment committee of Ellis Transport and Storage
Inc. is considering two investment projects. The estimated income
from operations and net cash flows from each investment are as
follows:
Warehouse
Tracking Technology
Year
Income from
Operations
Net Cash
Flow
Income from
Operations
Net Cash
Flow
1
$42,000
$138,000
$88,000
$221,000
2
42,000
138,000
67,000
186,000
3
42,000
138,000
34,000
131,000
4
42,000
138,000
15,000
90,000
5
42,000
138,000...
Average Rate of Return Method, Net Present Value Method, and Analysis The capital investment committee of...
Average Rate of Return Method, Net Present Value Method, and
Analysis
The capital investment committee of Ellis Transport and Storage
Inc. is considering two investment projects. The estimated income
from operations and net cash flows from each investment are as
follows:
Warehouse
Tracking Technology
Year
Income from
Operations
Net Cash
Flow
Income from
Operations
Net Cash
Flow
1
$34,000
$110,000
$71,000
$176,000
2
34,000
110,000
54,000
149,000
3
34,000
110,000
27,000
105,000
4
34,000
110,000
12,000
72,000
5
34,000
110,000...
Average Rate of Return Method, Net Present Value Method, and Analysis The capital investment committee of...
Average Rate of Return Method, Net Present Value Method, and
Analysis
The capital investment committee of Ellis Transport and Storage
Inc. is considering two investment projects. The estimated income
from operations and net cash flows from each investment are as
follows:
Warehouse
Tracking Technology
Year
Income from
Operations
Net Cash
Flow
Income from
Operations
Net Cash
Flow
1
$63,000
$207,000
$132,000
$331,000
2
63,000
207,000
101,000
279,000
3
63,000
207,000
50,000
197,000
4
63,000
207,000
22,000
135,000
5
63,000
207,000...
Average Rate of Return Method, Net Present Value Method, and Analysis The capital investment committee of...
Average Rate of Return Method, Net Present Value Method, and
Analysis
The capital investment committee of Ellis Transport and Storage
Inc. is considering two investment projects. The estimated income
from operations and net cash flows from each investment are as
follows:
Warehouse
Tracking Technology
Year
Income from
Operations
Net Cash
Flow
Income from
Operations
Net Cash
Flow
1
$63,000
$197,000
$132,000
$315,000
2
63,000
197,000
101,000
266,000
3
63,000
197,000
50,000
187,000
4
63,000
197,000
22,000
128,000
5
63,000
197,000...
Average Rate of Return Method, Net Present Value Method, and Analysis The capital investment committee of...
Average Rate of Return Method, Net Present Value Method, and
Analysis
The capital investment committee of Ellis Transport and Storage
Inc. is considering two investment projects. The estimated income
from operations and net cash flows from each investment are as
follows:
Warehouse
Tracking Technology
Year
Income from
Operations
Net Cash
Flow
Income from
Operations
Net Cash
Flow
1
$43,200
$133,000
$91,000
$213,000
2
43,200
133,000
69,000
180,000
3
43,200
133,000
35,000
126,000
4
43,200
133,000
15,000
86,000
5
43,200
133,000...
Average Rate of Return Method, Net Present Value Method, and Analysis The capital investment committee of...
Average Rate of Return Method, Net Present Value Method, and
Analysis
The capital investment committee of Ellis Transport and Storage
Inc. is considering two investment projects. The estimated income
from operations and net cash flows from each investment are as
follows:
Warehouse
Tracking Technology
Year
Income from
Operations
Net Cash
Flow
Income from
Operations
Net Cash
Flow
1
$58,800
$180,000
$123,000
$288,000
2
58,800
180,000
94,000
243,000
3
58,800
180,000
47,000
171,000
4
58,800
180,000
21,000
117,000
5
58,800
180,000...
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