Investment Decision

Analyze the following scenario: Duncombe Village Golf Course is considering the purchase of new equipment that will cost $1,200,000 if purchased today and will generate the following cash disbursements and receipts.  Should Duncombe pursue the investment if the cost of capital is 8 percent?  Why?  Clearly label your calculations in your analysis.  You must respond to at least two of your classmates’ postings to receive full credit.

Year

Cash Receipts

Cash Disbursements

Net Cash Flow

1

1,000,000

500,000

500,000

2

925,000

475,000

450,000

3

800,000

450,000

350,000

4

750,000

430,000

320,000

This class requires you to mathematically solve several financial management problems using simple algebra.  The book has step-by-step explanations and examples.  Two comments about math:

1) Starting with Assignment 1 you are going to need to manipulate numbers and in many cases submit an MS Excel spreadsheet.  In most cases you will also need to submit a short paper about some decision you are recommending.  Treat your papers as if you are writing to a “math phobic” boss, e.g., explain what the math means when reaching you recommendation.

2) Starting with Week 2 the discussion questions have math problems embedded.  I know it may be difficult to “discuss” arithmetic, but are a graduate student.  So get creative and get some reasonable 200-word posts in the Dqs.