Adams Company has a choice of two investment alternatives. The present value of cash inflows and outflows for the first alternative is $130,000 and $102,000, respectively. The present value of cash inflows and outflows for the second alternative- $305,000 and $265,000, respectively. Required a. Calculate the net present value of each investment opportunity. Note: Negative amounts should be indicated by a minus sign. b. Calculate the present value index for each investment opportunity. Note: Round "PVI" to 2 decimal places. c. Indicate which investment will produce the higher rate of return. a. Alternative 1 (NPV) a. Alternative 2 (NPV) b. Alternative 1 (PVI) b. Alternative 2 (PVI) The investment that (UGTBAR

Adams Company has a choice of two investment alternatives. The present value of cash inflows and outflows for the first alternative is $130,000 and $102,000, respectively. The present value of cash inflows and outflows for the second alternative- $305,000 and $265,000, respectively. Required a. Calculate the net present value of each investment opportunity. Note: Negative amounts should be indicated by a minus sign. b. Calculate the present value index for each investment opportunity. Note: Round "PVI" to 2 decimal places. c. Indicate which investment will produce the higher rate of return. a. Alternative 1 (NPV) a. Alternative 2 (NPV) b. Alternative 1 (PVI) b. Alternative 2 (PVI) The investment that (UGTBAR

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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What is the NPV of the following cash flows if the required rate of return is 0.13? Year 0 1 2 3 4 CF -3,241 2,952 1,242 3,310 1,616 Enter the answer with 2 decimals (e.g. 1000.23).
(Present value of annuities and complex cash flows) You are given three investment alternatives to analyze. The cash flows from these three investments are as follows: Investment Alternatives End of Year A B C 1 $ 18,000 $ 18,000 2 18,000 3 18,000 4 18,000 5 18,000 $ 18,000 6 18,000 90,000 7 18,000 8 18,000 9 18,000 10 18,000 18,000 (Click on the icon in order to copy its contents into a spreadsheet.) Assuming an annual discount rate of 23 percent, find the present value of each investment. Question content area bottom Part 1 a. What is the present value of investment A at an annual discount rate of 23 percent? $ enter your response here (Round to the…
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
a. Find the present values of the following cash flow streams at a 9% discount rate. Do not round intermediate calculations. Round your answers to the nearest cent. 0 1 2 3 4 Stream A Stream B Stream A: $ $0 $0 5 $100 $350 $350 $350 $300 $300 $350 $350 $350 $100 Stream B: $ b. What are the PVS of the streams at a 0% discount rate? Round your answers to the nearest dollar. Stream A: $ Stream B: $
A firm evaluates all of its projects by applying the IRR rule. Year Cash Flow 0 -$ 152,000 1 64,000 2 75,000 3 59,000 a. What is the project's IRR? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. If the required return is 13 percent, should the firm accept the project? % a. Internal rate of return b. Project acceptance
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$29,000 −$29000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 a) What is the Internal Rate of Return (IRR) for each of these projects? b) Using the IRR decision rule, which project should the company accept? c) If the required return is 11 percent, what is the Net Present Value (NV) for each of these projects? d) Using the NPV decision rule, which project should the company accept? e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?
es McCann Co. has identified an investment project with the following cash flows. Year 1 234 a. If the discount rate is 10 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value at 16 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the present value at 25 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Cash Flow $820 1,130 1,390 1,525 b. C. Present value at 10% Present value at 16% Present value at 25%
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Consider two assets with the following cash flow streams: Asset A generates $4 at t=1, $3 at t=2, and $10 at t=3. Asset B generates $2 at t=1, $X at t=2, and $10 at t=3. Suppose X=6 and the interest rate r is constant. For r=0.1, calculate the present value of the two assets. Determine the set of all interest rates {r} such that asset A is more valuable than asset Draw the present value of the assets as a function of the interest rate. Suppose r=0.2. Find the value X such that the present value of asset B is 12. Suppose the (one-period) interest rates are variable and given as follows: r01=0.1,r12=0.2, r23=0.3. Calculate the yield to maturity of asset A. (You can use Excel or ascientific calculator to find the solution numerically.)
Consider the following cash flows: Year Cash Flow 0 −$ 29,000 1 14,700 2 14,200 3 10,600 What is the profitability index for the cash flows if the relevant discount rate is 10 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. What is the profitability index if the discount rate is 15 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. What is the profitability index if the discount rate is 22 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.
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