Session 6 HW Quiz

QUESTION 8 The INTERNAL RATE OF RETURN for the project shown above is: O 3.92% O 13.25 O 15.17% 9 21.22% O No IRR QUESTION 9

Homework, Chapter 26 Average Rate of Return The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Project A Project z Amount of investment $80,000 $92,000 Useful life 4 years 7 years Estimated residual value Estimated total income over the useful life $8,800 $27,370 Determine the expected average rate of return for each project. Round your answers to one decimal place. Project A Project z

Question 6 options: Investigation and a reasonable amount of work had brought the following project to the attention of Arthur Morgan, CEO of Valentine Ventures.   The following information is presented to you:               CCA rate Building:                              4%             CCA rate Equipment:                        30%             Cost of Capital                                    12%             Corporate Tax Rate                             40%   An immediate cash outlay of $800,000 will be required to purchase vacant land.   The vacant land will be required to house the specialized building that will be constructed over the next 2 years.  The building will require an immediate down payment of $700,000 now and $1,600,000 upon completion of the building at the end of the second year. New equipment also will be placed in the building at the end of the 2nd year.  The equipment will require annual year end purchase payments of $400,000 in year one and two.  The equipment…

Chapter 12: Graded Homework Question 11 of 15 View Policies Current Attempt in Progress -/1 ! Sandhill Company is considering a long-term investment project called ZIP. ZIP will require an investment of $132,100. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,500, and annual cash outflows would increase by $38,500. The company's required rate of return is 10%. Click here to view the factor table. Calculate the net present value on this project. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round present value answer to O decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value Whether this project should be accepted? The project should be accepted eTextbook and Media eTextbook Assistance Used Save for Later Last saved 1 second ago. Attempts: 0 of 3 used Cochmit Annuar

Question 4 Bell Manufacturing is considering investing in a new project. Two projects have been put forward for consideration. The following information has been gathered for each. Project A Project B Initial investment £500,000 £600,000 Life of project 4 years 4 years Estimated annual cash flows: Year Project A Project B Cash flow per year 1 160,000 180,000 170,000 190,000 3 110,000 100,000 4 90,000 150,000 Resale value of project 30,000 40,000 The company estimates its cost of capital at 12% and uses straight line depreciation method for its plant and machinery. Required a) Appraise the two Project using the following methods of investment appraisal: i. Payback period ii. Accounting Rate of Return iii. Net present value b) Discuss your findings and advise the company which project they should invest in if the projects are mutually exclusive (that is only one project may be undertaken).

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Problem #2 - Chapter 13 – Preference Ranking for Investment Projects The management of Revco Products is exploring four different investment opportunities, Information on the four projects under study follows: Project C (450,000) 522,970 72,970 Project B (360,000) 433,400 73,400 Project A Description Investment Required ($) Present value of Cash Inflows ($) Net Present Value ($) Life of the Project (in years) Project D (270,000) 336,140 66,140 (480,000) 567,270 87,270 6 3 12 6 Internal Rate of Return (%) 18% 19% 14% 16% Because the company's required rate of return is 10%, a 10% discount rate has been used in the present value computations above. Limited funds are available for the investment, so the company cannot accept all the available projects. 1) Compute the project profitability index for each investment project. 2) Rank the four projects according to preference in terms of the following metrics: Net Present Value b. Project Profitability Index Internal Rate of Return a. c. 3)…

Question content area top Part 1 ​(IRR calculation​) Determine the IRR on the following​ projects:   a. An initial outlay of ​$13,000 resulting in a single free cash flow of ​$17,165 after 9 years b. An initial outlay of ​$13,000 resulting in a single free cash flow of ​$46,394 after 15 years c. An initial outlay of ​$13,000 resulting in a single free cash flow of $105,001after 25 years d. An initial outlay of ​$13,000 resulting in a single free cash flow of ​$13,653 after 4 years

Year Project 1 Net Cash Flows Project 2 Initial investment $(60,000) $(55,500) 1. 2. 15,000 35,000 27,400 3. 22,000 15,000 22,000 a. Compute payback period for each project. Based on payback period, which project is preferred? b. Compute net present value for each project. Based on net present value, which project is preferred? Complete this question by entering your answers in the tabs below. Required A Required B Compute net present value for each project. Based on net present value, which project is preferred? Note: Round your present value factor to 4 decimals. Round your final answers to the nearest whole dollar. Net Cash Flows Present Value Present Value of Net Factor Cash Flows Project 1 Year 1 Year 2 Year 3 Totals Initial investment Net present value Project 2 Year 1 Year 2 Year 3 Totals Initial investment $ 0 $ 0 $ 0 $ 0 $ 0 Net present value Based on net present value, which project is preferred? $ 0

ment #5 Question 8, P7-23 (similar to) Part 1 of 7 HW Score: 40%, 4 of 10 points O Points: 0 of 1 Save K You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $10.4 million. Investment A will generate $2.16 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.44 million at the end of the first year, and its revenues will grow at 2.9% per year for every year after that. a. Which investment has the higher IRR? b. Which investment has the higher NPV when the cost of capital is 5.4%? c. In this case, for what values of the cost of capital does picking the higher IRR give the correct answer as to which investment is the best opportunity? a. Which investment has the higher IRR? The IRR of investment A is ☐ %. (Round to the nearest integer.)

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Question 16 of 30 View Policies Current Attempt in Progress -/0.35 ⠀ Crane Crafts Corp. management is evaluating two independent capital projects that will each cost the company $200,000. The two projects will provide the following cash flows: Year Project A Project B 1 $66,750 $26,450 2 93,450 66,125 3 34,235 143,250 4 151,655 98,110 (a1) What is the payback period of both projects? (Round answers to 2 decimal places, e.g. 15.25.) The Payback of Project A is years and Project B is eTextbook and Media Save for Later Using multiple attempts will impact your score. 20% score reduction after attempt 2 years. Attempts: 0 of 3 used Submit Answer (a2) The parts of this question must be completed in order. This part will be available when you complete the part above. Search ♡

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QUESTION 14 You have a total of $30,000 to invest in a project and are considering the following three projects: Cash Flows Project A ($30,000) $8,500 Year Project B ($30,000) $19,600 Project C ($30,000) $10,400 1 $9,300 $17,300 $4,500 $10,400 $10,400 3. $10,400 4. $11,200 $4,200 $10,400 $12,300 $2,300 $10,400 If the cost of capital (discount rate) is 10%, which project(s) do you invest in and why? A. Project B- it will pay back the quickest OB. Project C- it generates the greatest cash flow C. Project A-it has the highest accounting rate of return D.Project B-it has the highest net present value E. Project A- it has the highest net present value OF. Project C- it has the highest profitability index

Q. 1 purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Alleyne, staff analyst at McGloire's, is preparing an analysis of the three projects under consideration by Joyanne McGloire, the company's owner. McGloire Construction is analyzing its capital expenditure proposals for the A в D Project A Project B Project C 1 Projected cash outflow Net initial investment 2 3 $3 000 000 $1 500 000 $4 000 000 4 5 Projected cash inflows Year 1 $1 000 000 1 000 000 1 000 000 1 000 000 $ 400 000 $2 000 000 7 Year 2 900 000 2 000 000 8 Year 3 800 000 200 000 Year 4 100 000 10 11 Required rate of return 10% 10% 10% 1. Because the company's cash is limited, McGloire thinks the payback method should be used to choose between the capital budgeting projects. a. List two benefits and two limitations of using the payback method to choose between projects? b. Calculate the payback period for each of the three project Ignore income taxes. Using the payback…

QUESTION 4 Hook n' Crook, Inc. has a 2-year project with the following cash flows: I=-$1,000, C₁ = +$5489, and C₂ =-$-4490. Find the value of the LARGEST IRR of this project. Note: If you wish, you may use the calculator to find one of the IRRS, and then use a method given in your class notes to find the other one, so you can determine which one is the largest number. Give the answer as a percent with two decimals; e.g., 23.24 and, as always, do not include symbols in your answer.

Time Remaining 1 hour 6 minutes 10 seconds 01:06:10     Item 8   Time Remaining 1 hour 6 minutes 10 seconds 01:06:10     Living Colour Company has a project available with the following cash flows: Year Cash Flow 0 −$ 32,190 1 8,510 2 10,290 3 14,820 4 16,330 5 11,420 If the required return for the project is 9.7 percent, what is the project's NPV?   Multiple Choice   $29,180.00   $13,808.85   $14,959.58   $15,781.54   $6,620.43

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Information for two alternative projects involving machinery investments follows: Project 2 Project 1 $ (125,000) $ (95,000) 15,000 14,850 Initial investment Salvage value Annual income a. Compute accounting rate of return for each project. b. Based on accounting rate of return, which project is preferred? Complete this question by entering your answers in the tabs below. Required A Required B 0 16,250 Compute accounting rate of return for each project. Project 1 Project 2 Numerator: Accounting Rate of Return 1 7 Denominator: (Required A W Required B > Accounting rate of return

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: Exercise 24-22A (Algo) Using Excel to compute IRR LO P4 Following is information on two alternative investments. Beachside Resort is considering building a new pool or spa. The company requires a 10% return from its investments. Pool Spa Initial investment $ (173,000) $ (118,000) Net cash flows in Year 1 41,300 33,300 Ces Year 2 57,300 51,300 Year 3 81,595 67,300 Year 4 91,700 73,300 Year 5 66,300 25,300 Compute the internal rate of return for each of the projects using excel functions. (Round your answers to 2 decimal places.) IRR Pool Spa %