Mini Case Report – The Problem at Day-Pro

1) PayBack Period to get Synthetic Resin and Epoxy Resin:

Artificial Resin PBP = a couple of + 250/200 = 2 . 5 years

Epoxy Botanical PBP = 1 & 200/400 = 1 . a few years

To demonstrate that making use of the Payback Period to evaluate the projects is flawed, Bernard can believe the PayBack Period neglects the time value of money, requires an arbitrary cutoff stage, ignores money flows beyond the cut-off date, and it is biased against long-term projects, such as research and development, and fresh projects (Corporate Finance web page 238).

2) Discounted payback Period (DPP) using 10% discount rate:

Synthetic Botanical DPP:

1,000,000 – [(350,000)/(1 + 0.1)^1 + (400,000)/(1+0.1)^2] by 100 sama dengan 35, 124, 100/375, 657 = 93. 5% of year several 1 & 1 +0. 935 =2. 935

Epoxy Botanical DPP:

800,000 – [(600,000)/(1 + 0.1)^1] x 95 = (800, 000 – 545, 454. 5) back button 100 sama dengan 25, 454, 550/330, 578. 5 sama dengan 77% of year installment payments on your 1 +0. 77= 1 ) 77

Harry should not ask the Board to use DPP as the deciding element because DPP does not give a concrete decision criterion that could indicate whether or not the investment will increase the business value, it requires an estimate of the cost of capital in order to compute the payback, and this ignores money flows past the discounted payback period. 4) Artificial Resin IRR = 37%

Epoxy Botanical IRR sama dengan 43%

IRR calculated using Excel

Harry can influence the table that IRR measure could be misleading by explaining it may result in multiple answers with non-conventional funds flows and it may cause incorrect decisions in comparisons of mutually exclusive investments. 5) Synthetic Resin NPV:

NPV = CI – COMPANY

NPV sama dengan [(350, 000)/(1 + 0. 1)^1 + (400, 000)/(1+0. 1)^2 + (500, 000)/(1 + 0. 1)^3 + (650, 000)/(1 & 0. 1)^4 + (700, 000)/(1 & 0. 1)^5] – 1, 000, 000 NPV = you, 903, 024 – you, 000, 500

NPV sama dengan 903, 024

Epoxy Botanical NPV:

NPV = [(600, 000)/(1 + zero. 1)^1 + (400, 000)/(1+0. 1)^2 + (300, 000)/(1 + 0. 1)^3 + (200, 000)/(1 + 0. 1)^4 & (200, 000)/(1 + 0. 1)^5] – you, 000, 500 NPV = 1, 362, 212 – 800, 1000

NPV = 562, 212

The...