R.K.T. Case

Topics: Net present value, Internal rate of return, Cash flow Pages: 4 (1294 words) Published: February 3, 2013

La Verne, California


BUS 500D: Business Finance

Gong Chen

MBA Program

March 2, 2012

The main purpose of this paper is to have a brief analysis and evaluation on the project provided by Road King Trucks Company. Six main problems offered are the main topics in this paper. After evaluation, a recommendation will put out to choose the right engine and on the project.

Road King Trucks Case Analysis
Summary results and recommendations
After these analyses based on the data provided, the project held by Road King Trucks should accept. There are some reasons to hold this opinion. First, we look at the NPV, which is Net Present Value, is positive of about $784,246,998.21. Internal Rate of Return is 13.27%, which is far more than the cost of capital. This figure shows that the project turns to be very profitable. Some questions should still be paid attention to, like the difference between the forecasted average inflation rate and real world inflation rate, which engine has a lower returning rate, and the change and establishing of related policies. Think that he who laughs last laughs best.

How much importance should be given to the energy cost situation? There are two ways for a truck company to save energy and increase sales. One cause maybe is the style, the design of trucks. It is obviously expensive and unwise for a company to design and sell just one truck. Just think about Lego blocks, or the Tangram. Just take Tangram for example; with only seven different parts, one can design thousands of unique graphics. If Road King can design a series of truck parts like a Tangram and assembling different style to the customers, the sales will increase soon. Do not forget that energy does not only contain fuel, but also materials that are idle. The other suggestion is that with more efficient...
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