Exercise 11-18 (Algo) Net present value, unequal cash flows, and internal rate of return LO P3, P4 Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $246,000 and would yield the following annual net cash flows. (PV of $1. FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals Project C1 $ 18,000 114,000 174,000 $ 306,000 Project C2 $ 102,000 102,000 102,000 $ 306,000 a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar. Project C1 Net Cash Flows x Present Value of 1 at 10% Present Value of Net Cash Flows Year 1 Year 2 Year 3 Totals Totals Project C2 Present Value Net Cash Flows x of 1 at 10% Present Value of Net Cash Flows Year 1 Year 2 Year 3 Which projects, if any, should be accepted < Required A Required B > Show less▲ Required A Required B Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. (I) Is the internal rate of return higher or lower than 10% for Project C1? (ii) Is the internal rate of return higher or lower than 10% for Project C2? < Required A Required B
Exercise 11-18 (Algo) Net present value, unequal cash flows, and internal rate of return LO P3, P4 Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $246,000 and would yield the following annual net cash flows. (PV of $1. FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals Project C1 $ 18,000 114,000 174,000 $ 306,000 Project C2 $ 102,000 102,000 102,000 $ 306,000 a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar. Project C1 Net Cash Flows x Present Value of 1 at 10% Present Value of Net Cash Flows Year 1 Year 2 Year 3 Totals Totals Project C2 Present Value Net Cash Flows x of 1 at 10% Present Value of Net Cash Flows Year 1 Year 2 Year 3 Which projects, if any, should be accepted < Required A Required B > Show less▲ Required A Required B Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. (I) Is the internal rate of return higher or lower than 10% for Project C1? (ii) Is the internal rate of return higher or lower than 10% for Project C2? < Required A Required B
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Exercise 11-18 (Algo) Net present value, unequal cash flows, and internal rate of return LO P3, P4
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $246,000 and would yield
the following annual net cash flows. (PV of $1. FV of $1, PVA of $1, and FVA of $1)
Note: Use appropriate factor(s) from the tables provided.
Net cash flows
Year 1
Year 2
Year 3
Totals
Project C1
$ 18,000
114,000
174,000
$ 306,000
Project C2
$ 102,000
102,000
102,000
$ 306,000
a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B
to determine which projects, if any, should be accepted.
b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is
not necessary to compute IRR to answer this question.
Complete this question by entering your answers in the tabs below.
Required A Required B
The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in
Appendix B to determine which projects, if any, should be accepted.
Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals.
Round your answers to the nearest whole dollar.
Project C1
Net Cash Flows
x
Present Value
of 1 at 10%
Present Value of
Net Cash Flows
Year 1
Year 2
Year 3
Totals
Totals
Project C2
Present Value
Net Cash Flows
x
of 1 at 10%
Present Value of
Net Cash Flows
Year 1
Year 2
Year 3
Which projects, if any, should be accepted
< Required A
Required B >
Show less▲
Required A Required B
Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project
C2? Hint: It is not necessary to compute IRR to answer this question.
(I) Is the internal rate of return higher or lower than 10% for Project C1?
(ii) Is the internal rate of return higher or lower than 10% for Project C2?
< Required A
Required B
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