Cepeda Manufacturing Company is considering three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following cash inflows. Year AA BB CC $7.000 $9.500 $11.000 9000 9.500 10,000
Cepeda Manufacturing Company is considering three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following cash inflows. Year AA BB CC $7.000 $9.500 $11.000 9000 9.500 10,000
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
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Transcribed Image Text:Cepeda Manufacturing Company is considering three new projects, each requiring an equipment investment of $22.000. Each project
will last for 3 years and produce the following cash inflows.
Year
AA
BB
CC
$7.000
$9.500
$11.000
9,000
9,500
10,000
15,000
9,500
9.000
Total
$31.000
$28.500
$30,000
The equipment's salvage value is zero. Cepeda uses straight-line depreciation. Cepeda will not accept any project with a payback
period over 2 years. Cepeda's minimum required rate of return is 12%
Click here to view PV table.
Compute the net present value of each project. (For calculation purposes, use 5 decimal places as displayed in the factor table provided
and final answers to O decimal places, eg. 5,275.)
AA
BB
CC
Net present value
Indicate the most desirable project and the least desirable project using this method.
Most desirable
Project CC
Least desirable
Project BD
Attempts: Dof 1 used
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