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Compute the net present value of each proje

Compute the net present value of each proje

FINANCIAL ACCOUNTING
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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Flounder Manufacturing Company is considering three new projects, each requiring an equipment investment of $23,800. Each project will last for 3 years and produce the following cash flows. Year 1 2 3 Total (a) AA BB $7,600 $10,300 $11,600 10,300 10,600 10,300 9,600 15,600 $32,800 Click here to view PV tables. The salvage value for each of the projects is zero. Flounder uses straight-line depreciation. Flounder will not accept any project with a payback period over 2.2 years. Flounder's minimum required rate of return is 12%. Payback period (b) Your answer is correct. Compute each project's payback period. (Round answers to 2 decimal places, e.g. 52.75.) Most desirable $30,900 $31,800 Least desirable CC Indicating the most desirable project and the least desirable project using this method. Project CC eTextbook and Media 9,600 Project AA Most desirable Net present value $ Least desirable AA 2.42 years AA BB Compute the net present value of each project. (Use the above table.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275.) $ 2.31 years BB Indicating the most desirable project and the least desirable project using this method. $ CC CC 2.17 years Attempts: 1 of 5 used
Transcribed Image Text:Flounder Manufacturing Company is considering three new projects, each requiring an equipment investment of $23,800. Each project will last for 3 years and produce the following cash flows. Year 1 2 3 Total (a) AA BB $7,600 $10,300 $11,600 10,300 10,600 10,300 9,600 15,600 $32,800 Click here to view PV tables. The salvage value for each of the projects is zero. Flounder uses straight-line depreciation. Flounder will not accept any project with a payback period over 2.2 years. Flounder's minimum required rate of return is 12%. Payback period (b) Your answer is correct. Compute each project's payback period. (Round answers to 2 decimal places, e.g. 52.75.) Most desirable $30,900 $31,800 Least desirable CC Indicating the most desirable project and the least desirable project using this method. Project CC eTextbook and Media 9,600 Project AA Most desirable Net present value $ Least desirable AA 2.42 years AA BB Compute the net present value of each project. (Use the above table.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275.) $ 2.31 years BB Indicating the most desirable project and the least desirable project using this method. $ CC CC 2.17 years Attempts: 1 of 5 used
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