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Data table Year Plan Alpha Plan Beta $ 1,600,000 $ 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 $ 16,000,000 $ Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total 1,600,000 2,300,000 3,000,000 2,300,000 1,600,000 1,200,000 1,100,000 1,000,000 900,000 1,000,000 16,000,000 any is considering two capital investments. Both investments have an initial cost of $10,000,000 ash inflows of $16,000,000 over 10 years. Langley requires a 10% rate of return on this type of pected net cash inflows are as follows: Requirements 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? 2. Explain the relationship between NPV and IRR. Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 1? Why or why not? 3. After further negotiating, the company can now invest with an initial cost of $9,500,000 for both plans. Recalculate the NPV and IRR. Which plan, if any, should the company pursue? Print Done

Data table Year Plan Alpha Plan Beta $ 1,600,000 $ 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 $ 16,000,000 $ Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total 1,600,000 2,300,000 3,000,000 2,300,000 1,600,000 1,200,000 1,100,000 1,000,000 900,000 1,000,000 16,000,000 any is considering two capital investments. Both investments have an initial cost of $10,000,000 ash inflows of $16,000,000 over 10 years. Langley requires a 10% rate of return on this type of pected net cash inflows are as follows: Requirements 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? 2. Explain the relationship between NPV and IRR. Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 1? Why or why not? 3. After further negotiating, the company can now invest with an initial cost of $9,500,000 for both plans. Recalculate the NPV and IRR. Which plan, if any, should the company pursue? Print Done

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 13E: Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a...
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Langley Company is considering two capital investments. Both investments have an initial cost of $10,000,000 and total net cash inflows of$16,000,000 over 10 years. Langley requires a 10​% rate of return on this type of investment. Expected net cash inflows are as​ followsI can't seem to understand how to do this question! Thank you :)

Data table Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Plan Alpha Plan Beta 1,600,000 $ 1,600,000 1,600,000 2,300,000 1,600,000 3,000,000 1,600,000 2,300,000 1,600,000 1,600,000 1,600,000 1,200,000 1,600,000 1,100,000 1,600,000 1,000,000 1,600,000 900,000 1,600,000 1,000,000 $ 16,000,000 $ 16,000,000 Print I Done X any is considering two capital investments. Both investments have an initial cost of $10,000,000 ash inflows of $16,000,000 over 10 years. Langley requires a 10% rate of return on this type of pected net cash inflows are as follows: Requirements 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? 2. Explain the relationship between NPV and IRR. Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 1? Why or why not? 3. After further negotiating, the company can now invest with an initial cost of $9,500,000 for both plans. Recalculate the NPV and IRR. Which plan, if any, should the company pursue? Print - Done X
Transcribed Image Text:Data table Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Plan Alpha Plan Beta 1,600,000 $ 1,600,000 1,600,000 2,300,000 1,600,000 3,000,000 1,600,000 2,300,000 1,600,000 1,600,000 1,600,000 1,200,000 1,600,000 1,100,000 1,600,000 1,000,000 1,600,000 900,000 1,600,000 1,000,000 $ 16,000,000 $ 16,000,000 Print I Done X any is considering two capital investments. Both investments have an initial cost of $10,000,000 ash inflows of $16,000,000 over 10 years. Langley requires a 10% rate of return on this type of pected net cash inflows are as follows: Requirements 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? 2. Explain the relationship between NPV and IRR. Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 1? Why or why not? 3. After further negotiating, the company can now invest with an initial cost of $9,500,000 for both plans. Recalculate the NPV and IRR. Which plan, if any, should the company pursue? Print - Done X
Langley Company is considering two capital investments. Both investments have an initial cost of $10,000,000 and total net cash inflows of $16,000,000 over 10 years. Langley requires a 10% rate of return on this type of investment. Expected net cash inflows are as follows: (Click the icon to view the expected net cash inflows.) Read the requirements. Requirement 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? (Use parentheses or a minus sign for a negative NPV. Round the NPV calculations to the nearest whole dollar and the IRR calculations to two decimal places, X.XX%.) The NPV (net present value) of Plan Alpha is The NPV (net present value) of Plan Beta is 00
Transcribed Image Text:Langley Company is considering two capital investments. Both investments have an initial cost of $10,000,000 and total net cash inflows of $16,000,000 over 10 years. Langley requires a 10% rate of return on this type of investment. Expected net cash inflows are as follows: (Click the icon to view the expected net cash inflows.) Read the requirements. Requirement 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? (Use parentheses or a minus sign for a negative NPV. Round the NPV calculations to the nearest whole dollar and the IRR calculations to two decimal places, X.XX%.) The NPV (net present value) of Plan Alpha is The NPV (net present value) of Plan Beta is 00
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