6. U3 Company is considering three long-term capital investment proposals. Eachinvestment has a useful life of 5 years. Relevant data on each project are as follows.ProjectBonoProjectEdgeProjectClaytonCapital investment$160,000$175,000$200,000Annual netincome:Year 118,00014,00027,00014,00023,00017,00016,00021,000314,00013,000414,00012,00012,00014,0009,000$ 96,000Total$ 72,000$ 70,000Depreciation is computed by the straight-line method with no salvage value. Thecompany's cost of capital is 15%. (Assume that cash flows occur evenly throughout theyear.)Instructionsa.Compute the cash payback period for each project. (Round to two decimals.)b.Compute the net present value for each project. (Round to nearest dollar.)C.Compute the annual rate of return for each project. (Round to two decimals.)d.Which project do you recommend? Why?2.

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Answered: 6. U3 Company is considering three…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The capital cost of a certain project is $625,000 and the annual expenses are $33,000. If the study period is 11 years, what is the present worth of this investment assuming 7.25% interest rate? O a. -$380,596 O b. -$244,404 O c. $380,596 O d. -$869,404 O e. $869,404
Consider the following investment projects for SDL Engineering. All of the projects have a three-year investment life: Project’s Cash Flow ($) Time (n) Project A Project B Project C Project D 0 -$1,500 -$1,200 -$1,600 -$3,000 1 0 $600 -$1,800 $800 2 0 $800 $800 $1,900 3 $3,000 $1,500 $2,500 $2,300 Compute the Net Present worth of each project where interest rate is 9%. Which project do you recommend based on the NPW? Other than the NPW, why else would you recommend this project? (you will be using the same rate that was for part A for this part. Calculate the IRR for each project Show all workings in excel
Emusk Inc. is evaluating two mutually exclusive projects. The required rate of return on these projects is 8%. Calculate the profitability index for project A. (Round to 3 decimals) Year 0 1 2 3 4 5 Project A -15,000,000 2,000,000 3,000,000 5,000,000 5,000,000 6,000,000 Project B -15,000,000 6,000,000 6,000,000 6,000,000 1,000,000 1,000,000
1. What is the profitability index of a project that costs $90,000 and returns $30,000 annually for 8 years if the opportunity cost of capital is 9.6%? a.0.64 b.0.80 c.1.76 d.1.05 e.1.26 2. King Corporation is planning a 15-year project with an initial investment of $2,013,000. The project will have $563,000 cash inflows per year in years 1-2; $166,000 cash inflows in years 3-10, and $57,000 cash inflows in years 11-15. Determine the project's internal rate of return (IRR). Using financial calculator a.6.87% b.5.72% c.4.58% d.10.30% e.8.24%
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Compute the payback statistic for Project A if the appropriate cost of capital is 9 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 0 1 2 3 4 5 Cash flow: −$2,100 $790 $810 $740 $520 $320 Payback: ? Years
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Consider the following fourmutually exclusive projects: Project J, K, L, and M. Assume that the investment in each project gets perpetually renewed (all the projects are perpetual). The cost of capital is 16%. Rank the projects according to profitability J K L M Initial investment 49,000 75,000 65,000 35,000 Annual cash flow 21,000 8,000 16,000 13,000 Lifecycle (years) 6 26 14 5s You are going to want to find the NPV and EAC of the cash flows. Since all of the cash flows are the same, you can use the PV function. Pay attention to the sign of the cash flows! You can also use the RANK function to rank the EACs for the four projects.
Joliet Company is considering two alternative investments. The company requires an 18% return from its investments. Category Project X Project Y Initial Investment 108,000 $98,000 Net cash flows anticipated: Year 1 36,000 25,000 Year 2 39,000 45,000 Year 3 32,000 42,000 Year 4 34,000 28,000 Year 5 25,000 17,000 Compute the IRR for both Projects and recommend one of them.
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8. JOY Corporation provides an allowance for its doubtful accounts receivable. allowance account had a credit balance of P8,000. Each month JOY accrues bad debts expense in an amount equal to 2% of credit sales. Total credit sales during 2016 amounted to P2,000,000. During 2016 uncollectible accounts receivable totaling P22,000 were written off against the allowance account. An aging of accounts receivable at December 31, 2016 indicates that an allowance of P42,000 should be provided for doubtful accounts as of the date. Accordingly, bad debts expense previously accrued during 2016 should be increased by At December 31, 2015, the
Details for two project proposals are shown below: Initial Cost ($320,000) ($360,000) Project Life (years) MARR (% per year) Benefits ($ per year) Costs ($ per year) 5 13% 14% $126,000 $143,000 ($5,000) ($5,000) For both of the projects, determine 1. Capital Recovery 2. Net Present Worth, NPW 3. Net Future Worth, NFW 4. Equivalent Uniform Annual Worth, EUAW 5. Internal Rate of Return, IRR Which project do you think should be chosen? WHY?

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