(Present Value Tables Are Needed

question 29

Essay

(Present value tables are needed.)Shaker Investments, a private investment holding company, is searching for a new investment opportunity. Shaker Investments has identified two potential investment opportunities: an upstart fast food chain and a growing organic grocery chain. Information for each investment follows:
Fast Food Organic Grocery
Chain Chain
Investment $975,000 $1,500,000
Useful life (years)15 15
Estimated annual net cash inflows for useful life $120,000 $210,000
Residual value $50,000 $100,000
Depreciation method straight-line straight-line
Required rate of return 8% 10%
Required:
a. Calculate the net present value of the Fast Food Chain.
b. Calculate the net present value of the Organic Grocery Chain.
c. Using the net present value method, which investment should Shaker select if it can select only one investment?

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Definitions:

Pretend

Act of simulation or feigning; behaving as if something is the case when in fact it is not.

Dysfunctional Conflict

A disagreement or conflict that leads to negative outcomes, disrupting group harmony or individual performance.

Absenteeism

the habitual non-presence of an employee at their job, often without good reason.

Turnover

The rate at which employees leave a company and are replaced by new employees.