Dannerly Press Case

Dannerly Press is involved in the printing industry, a volatile industry with low volumes. Fortunately, they have primarily concentrated in the telephone directory market, which has been relatively easy to work with from a budgeting perspective. They have been able to rely on census information to validate volume of work, rather than the overall publication market which relies heavily on print advertising to determine overall volume in terms of page count, size and distribution. Also, the directory market allows them to utilize longer contract periods (as much as ten years), which makes it easier to plan for capital expenditures.

In addition, Dannerly has entered the publication market by recently printing three publications, only two of which are currently printed. The third publication was deemed a huge loss when they were completely overwhelmed by reduced demand and additional competition.

Current Situation

Dannerly is in the process of preparing their capital expenditure budget for the year. Mr. Dannerly has made available a firm $22,500,000 for investment options and has asked Mr. Oliver to analyze several projects and prepare a recommendation. Mr. Oliver has detailed several project options, by determining the investment required for each project and the Net Present Value (NPV). He is planning to educate the meeting attendees on what NPV means; this will be important for the decision-makers to make adequate conclusions. He planned on using the following table to explain how NPV works.

Value of $1 at the end of each period |

| | | |

Discount Rate | 10% | 12% | |

Today (Year 0) | $ 1.00 | $ 1.00 | |

Year 1 | $ 0.91 | $ 0.89 | |

Year 2 | $ 0.83 | $ 0.80 | |

Year 3 | $ 0.75 | $ 0.71 | |

Year 4 | $ 0.68 | $ 0.64 | |

Year 5 | $ 0.62 | $ 0.57 | |

Year 6 | $ 0.56 | $ 0.51 | |

Year 7 | $ 0.51 | $...