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UMUC Week 3 Accounting Rate of Return on Investment Worksheet

UMUC Week 3 Accounting Rate of Return on Investment Worksheet

Discussion 1

 

Prior to beginning work on this discussion, please read the article by Hayley Peterson, 15 Companies That Are Defying the Retail Meltdown by Opening Hundreds of New Stores (Links to an external site.).

While many retailers are closing stores, some are rapidly building new locations, with at least one—Dollar General (NYSE: DG)—adding as many as 900 stores this year (Peterson, 2018).

Obtain Dollar General’s Form 10-K for the fiscal year ending on December 31, 2017. Form 10-K can be obtained either from the SEC (Links to an external site.)’s EDGAR Filing system or the “Investor Relations” link on the company’s website at www.dollargeneral.com (Links to an external site.). Read the “Growth Strategies” and the “Consolidated Statements of Cash Flows” sections of Dollar General’s 10-K Form to answer the following questions in an initial post of at least 200 words:

  • How many stores is Dollar General planning to open during its 2018 and 2019 fiscal years? By what percentage would these new stores increase the size of the company?
  • How much cash did General Dollar spend on investing activities during its 2016, 2017, and 2018 fiscal years? Do you think the amount spent on investing activities represents the full costs that General Dollar incurred to open new stores? Explain you answer.
  • Where did General Dollar get the cash used to make these investments?

Guided Response: Review several of your peers’ posts. In a post of at least 100 words, respond to at least two of your peers’ posts in a substantive manner. Provide information that they may have missed or may not have considered about Dollar General’s capital expenditures during the most recent fiscal years. Do you agree with your peers’ findings? Why or why not?

Discussion 2

 

Prior to beginning work on this discussion, please read the article Capital Investment Appraisal Techniques: A Survey of Current Usage (Links to an external site.) by Sangster (1993).

After setting the company’s goals, managers evaluate capital investment projects and decide which should be funded. Suppose a company has four different capital budgeting projects from which to choose but has constrained funds and cannot implement all of the projects.

The following table contains information about four projects in which X Corporation has the opportunity to invest. This information is based on estimates that different managers have prepared about the company’s potential project.

Project

Investment Required

Net Present Value

Life of Project

Internal Rate of Return

Profitability Index

Payback Period in Years

Accounting Rate of Return

A

$ 226,000

$ 36,908

5

21%

1.17

2.97

20%

B

$ 406,000

$ 50,740

6

24%

1.13

3.13

15%

C

$1,040,000

$152,325

3

19%

1.16

2.18

14%

D

$1,630,000

$ 19,870

4

14%

1.02

3.00

23%

Part 1: Rank the four projects in order of preference by using the following table:

(a)
Net Present Value

(b)
Profitability Index

(c)
Internal Rate of Return

(d)
Payback Period

(e)
Average Rate of Return

1st preferred

Project A, B, C, or D?

2nd preferred

3rd preferred

4th preferred

Part 2: Write a response in an initial post of at least 200 words discussing the usefulness of capital investment techniques (net present value, profitability index, internal rate of return, payback period, and average rate of return) in selecting the four alternative investment opportunities in part 1.

Guided Response: Review several of your peers’ posts. In a post of at least 100 words, respond to at least two of your peers’ posts in a substantive manner. Provide information that they may have missed or may not have considered about the strengths and weaknesses of the capital budgeting techniques including a comparison between techniques based on the time value of money versus those that are not. Do you agree with your peers’ findings? Why or why not?

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