Investment requiredPresent value of cash inflows -Net present valueLife of the project.Internal rate of return1Required 1$ (270,000)336,140$ 66,140Project6 years18%Complete this question by entering your answers in the tabs below.Required 2Compute the profitability index for each investment project.Note: Round your answers to 2 decimal places.ProfitabilityIndex2$ (450,000)522,970$ 72,970Project Number3 years19%The net present values above have been computed using a 10% discount rate. Limited funds are available for investment, so thecompany can't accept all of the available projects.Required:1. Compute the profitability index for each investment project.2. Rank the four projects according to preference, in terms of net present value, profitability index, and internal rate of return.3$ (360,000)433,400$ 73,40012 years.14$ (480,000)567,270$ 87,2706 years16%

The concept of net present value is used to determine the current worth of all projected future cash…

Investment required Present value of cash inflows Net present value Life of the project Internal rate of return 1 $ (270,000) 336,140 $ 66,140 Required 1 Required 2 6 years 18% 2 $ (450,000) 522,970 $ 72,970 Compute the profitability index for each investment project. Note: Round your answers to 2 decimal places. Project Number 3 years 19% 3 $ (360,000) 433,400 $ 73,400 12 years. 14% 4 $ (480,000) 567,270 $ 87,270 The net present values above have been computed using a 10% discount rate. Limited funds are available for investment, so the company can't accept all of the available projects. Required: 1. Compute the profitability index for each investment project. 2. Rank the four projects according to preference, in terms of net present value, profitability index, and internal rate of return. Complete this question by entering your answers in the tabs below. 6 years 16%

Investment required Present value of cash inflows Net present value Life of the project Internal rate of return 1 $ (270,000) 336,140 $ 66,140 Required 1 Required 2 6 years 18% 2 $ (450,000) 522,970 $ 72,970 Compute the profitability index for each investment project. Note: Round your answers to 2 decimal places. Project Number 3 years 19% 3 $ (360,000) 433,400 $ 73,400 12 years. 14% 4 $ (480,000) 567,270 $ 87,270 The net present values above have been computed using a 10% discount rate. Limited funds are available for investment, so the company can't accept all of the available projects. Required: 1. Compute the profitability index for each investment project. 2. Rank the four projects according to preference, in terms of net present value, profitability index, and internal rate of return. Complete this question by entering your answers in the tabs below. 6 years 16%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Only typed answer
None
Expansion versus replacement cash flows Tesla Systems has estimated the cash flows over the 5-year lives for two projects, A and B. These cash flows are summarized in the following table. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Project A Project B Initial investment −$4,646,000 $1,553,000* Year Operating cash flows 1 $562,000 $390,000 2 915,000 390,000 3 1,343,000 390,000 4 2,218,000 390,000 5 3,405,000 390,000 *After-tax cash inflow expected from liquidation. a. If Project A, which requires an initial investment of −$4,646,000, is a replacement for Project B and the $1,553,000 initial investment shown for Project B is the after-tax cash inflow expected from liquidating it, what would be the net cash flows for this replacement decision? b. How can an expansion decision such as project A be viewed as a special form of a…
Average Rate of Return The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Amount of investment Useful life Estimated residual value Estimated total income over the useful life Project A Project Z $80,000 $64,000 4 years 9 years 0 0 $6,400 $20,160 Determine the expected average rate of return for each project. Round your answers to one decimal place. Project A Project Z Feedback Check My Work X % X %
Information for two alternative projects involving machinery investments follows: Initial investment Project 1 $ (123,000) Project 2 $ (93,000) Salvage value 0 13,000 Annual income 14,145 12,720 a. Compute accounting rate of return for each project. b. Based on accounting rate of return, which project is preferred? Complete this question by entering your answers in the tabs below. Required A Required B Compute accounting rate of return for each project. Project 1 Project 2 Accounting Rate of Return Denominator: Numerator: 1 = Accounting rate of return 0 0
A2
Year Cash Flow (A) Cash Flow (B) 0 −$ 417,000 −$ 36,000 1 48,000 19,600 2 58,000 14,100 3 75,000 14,600 4 532,000 11,400 The required return on these investments is 13 percent. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. Based on your answers in (a) through (d), which project will you finally choose?
Question Completion Status: QUESTION 1 Tyrell Corporation is considering a project with the following cash flows (in millions of dollars): Year Cash flows -$200 $100 $150 $200 -$100 0 1 ·234 If the required return is 12%, what is the MIRR of the project? 16.45% 18.36% 20.34% 22.49% 26.86% QUESTION ?
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.
Year 0 Cash Flow = +$25,000 (assume only 1 change in signs) Project IRR = 4.5% Project DR = 6.0% %3D Should the project be accepted without reviewing NPV? Why or why not? Explain
Cash Payback Period A project has estimated annual net cash flows of $49,500. It is estimated to cost $198,000. Determine the cash payback period. If required, round your answer to one decimal place. ? Years
The management of Riker Inc. is exploring five different investment opportunities. Information on the five projects under study follow Project Number Investment required Present value of cash inflows at a 10% discount rate Net present value Life of the project Project 1 2 3 4 5 Profitability Index 1 2 3 $(390,000) $(330,000) $(350,000) 478,490 396,950 $ 88,490 $ 66,950 6 years 3 years First preference Second preference 433,190 $ (83,190) 5 years The company's required rate of return is 10%; thus, a 10% discount rate has been used in the preceding present value computations. Limited funds are available for investment, and so the company cannot accept all of the available projects. Third preference Fourth preference Fifth preference 4 $(330,000) Required: 1. Compute the profitability Index for each investment project. (Round your answers to 2 decimal places.) 300, 100 $ 29,900 12 years 5 $(480,000) 562,860 $82,860 6 years 2. Rank the five projects according to preference, in terms of (a)…