Consider the following scenario: you have just inherited a small

Consider the following scenario:

Don't use plagiarized sources. Get Your Custom Essay on
Consider the following scenario: you have just inherited a small
Just from $13/Page
Order Essay

You have just inherited a small island in the Bahamas. The island is near a favourite fishing location, and you are considering two alternative investments.

  • First, you could construct a boat landing that provides grounds for camping. You estimate that the landing will require a £1,000 investment today and that it is expected to generate cash flows of £1,000 per year, forever.
  • Alternatively, you could invest £10,000 today and build a restaurant and ‘beer garden’, which you believe will then generate cash flows of £4,000 per year, forever.

You cannot undertake both businesses on the island (they are mutually exclusive), and since both rely on tourists, you believe that the riskiness of each venture is identical (you may assume this to be the case and that the associated required return is 20%).

A quick calculation shows that the IRR of the first alternative is 100% and that the IRR of the second alternative is 40%. Hence, according to the IRR criterion, the first option is preferable.

For your Initial Response, in approximately 750 – 1,000 words, address the following:

  • Do you agree with the assessment?
  • Provide alternative capital budgeting evaluations of the two projects and discuss which method is the most reliable.
  • Also discuss what other factors should be taken into consideration. Be sure to articulate the strengths and weaknesses of each technique.

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more