Problem 1. Creighton Company’s balance sheet and income
statement are provided below:
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?
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:
Delta’s cost of capital is 12%
Required:
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?
