3. You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $11.1 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,764,300, $1,817,600, $1,786,000, and $1,239,500 over these four years, respectively, what is the project’s average accounting return (AAR)? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Average accounting return %
3. You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $11.1 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,764,300, $1,817,600, $1,786,000, and $1,239,500 over these four years, respectively, what is the project’s average accounting return (AAR)? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Average accounting return %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
3.
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You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $11.1 million, which will be |
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part of number 5:
| What is the |
Transcribed Image Text:Consider the following two mutually exclusive projects:
Year Cash Flow (X) Cash Flow (Y)
0
-$
20,400
-$
20,400
123
8,950
10,300
2
9,300
7,900
3
8,900
8,800
Calculate the IRR for each project. (Do not round intermediate calculations and enter
your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Project X
Project Y
%
%
5
What is the crossover rate for these two projects? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
Crossover rate
%
What is the NPV of Projects X and Y at discount rates of 0 percent, 15 percent, and 25
percent? (A negative answer should be indicated by a minus sign. Do not round
intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
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