Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the questions. Year Project A Cash Flow Project B Cash Flow -$50,000 -$20,000 15,000 6,000 15,000 6,000 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400 Calculate the net present value of project B. $2,709.21 $1,245.11 O $331.40 $1,564.25 O $3,802

Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the questions. Year Project A Cash Flow Project B Cash Flow -$50,000 -$20,000 15,000 6,000 15,000 6,000 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400 Calculate the net present value of project B. $2,709.21 $1,245.11 O $331.40 $1,564.25 O $3,802

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 4CMA: Foster Manufacturing is analyzing a capital investment project that is forecast to produce the...

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Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
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