Net Present Value Even though you're fairly certain that your evaluation and elimination is correct, you would like to compare the three proposals using the net present value method, and get some data about the internal rate of return of the proposals, each of which are expected to generate their respective annual net cash inflows for a period of 10 years. Compute the net present value of each proposal. You may need the following partial table of factors for present value of an annuity of $1. Round the present value of annual net cash flows to the nearest dollar. If your answer is zero enter "0". For the net present value, if required, use the minus sign (-) to indicate a negative amount. Present Value of an Annuity of $1 at Compound Interest (Partial Table) Year 10% 20% 1 0.909 0.833 5 3.791 2.991 10 6.145 4.192 Alpha Beta Gamma Annual net cash flow $ Present value factor Present value of annual net cash flows Amount to be invested Net present value
Net Present Value Even though you're fairly certain that your evaluation and elimination is correct, you would like to compare the three proposals using the net present value method, and get some data about the internal rate of return of the proposals, each of which are expected to generate their respective annual net cash inflows for a period of 10 years. Compute the net present value of each proposal. You may need the following partial table of factors for present value of an annuity of $1. Round the present value of annual net cash flows to the nearest dollar. If your answer is zero enter "0". For the net present value, if required, use the minus sign (-) to indicate a negative amount. Present Value of an Annuity of $1 at Compound Interest (Partial Table) Year 10% 20% 1 0.909 0.833 5 3.791 2.991 10 6.145 4.192 Alpha Beta Gamma Annual net cash flow $ Present value factor Present value of annual net cash flows Amount to be invested Net present value
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Net Present Value
Even though you're fairly certain that your evaluation and elimination is correct, you would like to compare the three proposals using the net present value method, and
get some data about the internal rate of return of the proposals, each of which are expected to generate their respective annual net cash inflows for a period of 10 years.
Compute the net present value of each proposal. You may need the following partial table of factors for present value of an annuity of $1. Round the present value of
annual net cash flows to the nearest dollar. If your answer is zero enter "0". For the net present value, if required, use the minus sign (-) to indicate a negative amount.
Present Value of an Annuity of $1
at Compound Interest (Partial Table)
Year
10%
20%
1
0.909
0.833
3.791
2.991
10
6.145
4.192
Alpha
Beta
Gamma
Annual net cash flow
Present value factor
Present value of annual net cash flows
Amount to be invested
Net present value
Transcribed Image Text:Average Rate of Return
You begin by trying to eliminate any proposals that are not yielding the company's minimum required rate of return of 20%. Complete the following table, and decide
whether Alpha, Beta, and/or Gamma should be eliminated because the average rate of return of their project is less than the company's minimum required rate of retur
Complete the following table. Enter the average rates of return as percentages rounded to two decimal places.
Estimated Average
Average
Average Rate
Accept or
Proposal
Annual Income
Investment
of Return
Reject
Alpha
2$
302,054
$
736,000
41.04
%
Аcсept v
Beta
272,019
2,839,450
9.58 V
Reject
Gamma
521,931
1,062,780
49.11
Аcсept v
Feedback
V Check My Work
Review the definition of average rate of return, and plug the relevant numbers into the formula from the data given.
Cash Payback Method
You've decided to confirm your results from the average rate of return by using the cash payback method.
Using the following table, compute the cash payback period of each investment. If required, round the number of years in the cash payback period to a whole number.
Annual Net
Cash Payback
Proposal
Initial Cost
Cash Inflow
Period in Years
Alpha
$
1,472,000
$4
351,145
4
Beta
5,678,900
475,608
12
Gamma
2,125,560
598,133 V
4
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