Initial Investment and Projected Cash Flow Project Initial Investment Cash Flow $8 million per year for 4 Project A $20 million years $4 million per year for 5 Project B $12 million years $4 million per year for 4 Project C $8 million |years $6 million per year for 3 Project D $12 million years

Initial Investment and Projected Cash Flow Project Initial Investment Cash Flow $8 million per year for 4 Project A $20 million years $4 million per year for 5 Project B $12 million years $4 million per year for 4 Project C $8 million |years $6 million per year for 3 Project D $12 million years

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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\table[[, Net Cash Flows ($)], [Year, Project T, Project F], [0, -100,000, -100,000 0 1 Net Cash Flows (S) Year Project T Project F -100,000 -100,000 60,000 33,500 60,000 33,500 33,500 33,500 2 3 4 Project T has a life of two years and project F has a life of four years. The cost of capital is 10% for both projects. Assume that both projects will be needed in future, and they can be repeated forever without any changes in their cash flows. Use the above information to answer questions 17-19. 17. Over a common life of 4 years, what is the NPV of project T [ (NPV (T, 2)]? a. $8264.46 b. $6190.49 c. $4132.23 d. $7547.30 s e. $7428.96 18. What is the Equivalent Annual Annuity (EAA) of project F? a. $2103.98 b. $1898.12 c. $1952.92 d. $2088.12 e. $1924.76 19. Which project should be accepted? a. Project T b. Project F c. None of the projects
nformation on four investment proposals is given below: Investment Proposal A B C D Investment required $ (900,000) $ (170,000) $ (90,000) $ (1,430,000) Present value of cash inflows 1,263,600 233,400 136,500 1,908,300 Net present value $ 363,600 $ 63,400 $ 46,500 $ 478,300 Life of the project 5 years 7 years 6 years 6 years Required: 1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference.
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