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 |
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