Holmes Institute HI5002 Memo 02 – T02, 2015
Mr. de Ville, the owner of Tasman Ian de Ville Investments Ltd. (TIDI) has asked
you to evaluate five investment projects. TIDI has a $10,000,000 investment
budget, an investment hurdle rate of 11.0 %, and the owner has a requirement that
all investments have a Payback Period (PBP) of 3.5 years. Also, Project 2 brings
the offices and warehouse up to the current fire code and the listed savings are the
“facilitation payments” (e.g. bribes) that will no longer need to be made to
inspectors to avoid the office being shut-down.
Year end Project 1 Project 2 Project 3 Project 4 Project 5
00 -$830,000 -$150,000 -$850,000 -$5,000,000 -$350,000
01 50,000 100,000 800,000 250,000
02 50,000 100,000 800,000 250,000
03 50,000 200,000 800,000 250,000
04 50,000 700,000 800,000 250,000
05 700,000 800,000 -2,750,000
06-30 1,100,000 800,000 250,000
Please review the above listed projects by providing NPV, IRR, PBP, B/Cratio and
do not forget social legitimacy needs and select the ones that should be brought to
the attention of the owner for investment consideration.