General Accounting Mountain Brook Company is considering two investment opportunities whosecash flows are provided below:YearInvestment A Investment BYear 0 ($15,000)($9,000)Year 1 5,0005,000Year 2 5,0004,000Year 3 5,0003,000Year 4 4,0001,000The company's hurdle rate is 12%. What is the present value index ofInvestment A?A. 1.00B. 0.97C. 1.12D. 1.01

Step 1: Introduction to capital budgetingCapital budgeting refers to the process of analyzing…

Answered: Mountain Brook Company is considering…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Mountain Brook Company is considering two investment opportunities whose cash flows are provided below: Investment A Investment B Year Year 0 ($15,000) ($9,000) Year 1 5,000 5,000 Year 2 5,000 4,000 Year 3 5,000 3,000 Year 4 4,000 1,000 The company's hurdle rate is 12%. What is the present value index of Investment A? A. 0.97 B. 1.00 C. 1.01 D. 1.12
ABC Enterprise would like to evaluate/analyze an investment proposal. Given the following:Investment amount - 450,000 (2022)Dividends / Revenue stream - 100,000 for the first year and an interval of 5,000 for the succeeding years Discount rate - 14%a. NPV for the period 2023 through 2029;b. Total NPV using manual computation;c. Total NPV using the Excel function; andd. IRR rate.EXCEL COMPUTATION AND FORMULA
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Suppose the MARR is 12%. Use the following table to answer the question-The IRR on the CMS Investment is FMS Initial Investment Annual Revenue Useful Life (Years) A. 17.0 % - 18.0% OB. 15.0 % - 16.0% OC. 11.0% - 12.0% O D.0.5% -1.0% O E.20.0% -21.0% CMS $20,000 6,688 $29,000 9,102
Suppose the MARR is 12%. Use the following table to answer the question--The IRR on the CMS Investment is CMS FMS Initial Investment Annual Revenue Useful Life (Years) A. 17.0% - 18.0% B. 20.0% - 21.0% C. 15.0% - 16.0% D. 0.5% -1.0% E. 11.0% - 12.0% $20,000 6,688 15 $29,000 9,102 in 5
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A company, which uses a MARR of 896, has been presented an investment opportunity that is summarized below, the standard notation for determining the Rate of Return for the proposed investment based on present worth is: year 1 3 8 Cash Flow $(440) $15 $35 $55 $75 $95 $115 $135 $155 (x1000) O 0 - 440,000 - 15,000(P/A, 196, 8) - 20,000(P/G, 196, 8) O None of them O 0 = -440,000 + 15,000(P/A, 196, 8) + 20,000(P/G, 196, 8) O 0= -440,000 + 155,00O(P/A, 196, 8) - 20,000(P/G, 196, 8) O ROR = -440.000 + 15.000(P/A, 896, 8) + 20,000(P/G, 896, 8) O 0 = -440,000 + 15,000(P/A, 196, 8) + 20,000(P/G. 196, 7) O 0--440.000 + 20.000(P/A, 196, 8) + 15,000(P/G, 196, 8)
Calculate the Payback period (PBP) and Profitability Index (PI) of the investment and state the Pro’s and Cons of this method The annual incremental profits/ (losses) relating to the investment are estimated as follows: Years CF’s (000) Year 0 -175,000 Year 1 K11,000 Year 2 K3,000 Year 3 K34,000 Year 4 K47,000 Year 5 K8,000 Investment at the start of the project would be K175, 000,000.the investment sum assuming nil disposal value after five years, would be written off using the equal instalment method. The depreciation has been included in the profit estimates above, which should be assumed to arise at each year end. Assume the cost of Capital is 12% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 D.f 1.00 0.893 0.797 0.712 0.636 0.567

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