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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
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
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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             %

 

part of number 5:

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.)

 

 
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.)
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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