Oriole Company is considering two different, mutually exclusive capital expenditure proposals Project A will cost $543.000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $74,600. Project B will cost $319,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $45,600. A discount rate of 7% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round present value answers to 0 decimal places, eg 125 and profitability index answers to 2 decimal places, eg. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value-Project A Profitability index Project A Net present value-Project B 5 $ Profitability index Project B
Oriole Company is considering two different, mutually exclusive capital expenditure proposals Project A will cost $543.000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $74,600. Project B will cost $319,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $45,600. A discount rate of 7% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round present value answers to 0 decimal places, eg 125 and profitability index answers to 2 decimal places, eg. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value-Project A Profitability index Project A Net present value-Project B 5 $ Profitability index Project B
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Qq.55.
Subject :- Account
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Oriole Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $543,000, has an expected useful life of 12 years, a salvage value of
zero, and is expected to increase net annual cash flows by $74,600. Project B will cost $319,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to
increase net annual cash flows by $45,600. A discount rate of 7% is appropriate for both projects. Click here to view PV table.
Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses es (45). Round
present value answers to 0 decimal places, eg 125 and profitability index answers to 2 decimal places, eg. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table
provided.)
Net present value-Project A $
Profitability index Project A
Net present value - Project B
Profitability index- Project B
$
Which project should be accepted based on Net Present Value?
should be accepted.
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