Data-Driven Decision Making
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- Roto Air plans to spend $1,000,000 on this project, resulting in a total savings of $2,500,000 over the life of the project. Calculate the Benefit Cost Ratio. Important: show your work. Ignore any effects of the time value of money.
- Roto Air also considered another project that would have partially satisfied their needs. It would have required a $750,000 investment and would result in a savings of $125,000 per year for 10 years. Calculate the Benefit Cost Ratio. Important: show your work. Ignore any effects of the time value of money.
- Comparing only the BCRs, explain which project should Roto Air should have chosen. Ignore any effects of the time value of money.
- Payback Period
- Calculate the payback period for the $1,000,000 investment shown above. Important: show your work. Ignore any effects of the time value of money.
- Calculate the payback period for the $750,000 investment shown above. Important: show your work. Ignore any effects of the time value of money.
- Comparing only on the payback periods, explain which project should Roto Air have chosen. Ignore any effects of the time value of money.
- Net Present Value (NPV)
- Calculate the Net Present Value of Roto Air’s $1,000,000 investment with a $250,000 annual savings for 10 years when the interest rate averages 3% annually. Important: show your work.
- Net Present Value (NPV)
- Calculate the Net Present Value of Roto Air’s $1,000,000 investment with a $250,000 annual savings for 10 years when the interest rate averages 3% annually. Important: show your work.