saint MBA560 test 8

saint MBA560 test 8

Question

Problem 1. Creighton Company's balance sheet and income statement are provided below:
saint MBA560 test 8



Required:

1) Compute the margin, turnover, and return on investment for Creighton Company.
2) What is the advantage of expanding the ROI formula to measure margin and turnover separately?

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Problem 2. Delta Company is evaluating two different capital investments, Project X and Y. Either X or Y would cost $100,000, and the company cannot afford to do both. The company expects that Project X would provide net cash inflows of $30,000 per year for 5 years. For Project Y, the net cash inflows are expected to be as follows:

saint MBA560 test 8

Delta's cost of capital is 12%

Required:

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1) Calculate the present value index for Project X and for Project Y.
2) Indicate whether each of the projects is an acceptable investment.
3) Which of the two projects should Delta implement?