PA11-3 (Static) Comparing, Prioritizing Multiple Projects [LO 11-1, 11-2, 11-3, 11-6] Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time horizon, management is finding it difficult to compare them. Assume straight line depreciation method is used. (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Project 1: Retooling Manufacturing Facility This project would require an initial investment of $4,850,000. It would generate $865,000 in additional net cash flow each year. The new machinery has a useful life of eight years and a salvage value of $1,000,000. Project 2: Purchase Patent for New Product The patent would cost $3,400,000, which would be fully amortized over five years. Production of this product would generate $425,000 additional annual net income for Hearne. Project 3: Purchase a New Fleet of Delivery Trucks Hearne could purchase 25 new delivery trucks at a cost of $115,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $5,000. Purchasing the fleet would allow Hearne to expand its customer territory, resulting in $200,000 of additional net income per year. Required: please just the Req 3. 3. Using a discount rate of 10 percent, calculate the net present value of each project. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Using a discount rate of 10 percent, calculate the net present value of each project. Note: Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.
PA11-3 (Static) Comparing, Prioritizing Multiple Projects [LO 11-1, 11-2, 11-3, 11-6] Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time horizon, management is finding it difficult to compare them. Assume straight line depreciation method is used. (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Project 1: Retooling Manufacturing Facility This project would require an initial investment of $4,850,000. It would generate $865,000 in additional net cash flow each year. The new machinery has a useful life of eight years and a salvage value of $1,000,000. Project 2: Purchase Patent for New Product The patent would cost $3,400,000, which would be fully amortized over five years. Production of this product would generate $425,000 additional annual net income for Hearne. Project 3: Purchase a New Fleet of Delivery Trucks Hearne could purchase 25 new delivery trucks at a cost of $115,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $5,000. Purchasing the fleet would allow Hearne to expand its customer territory, resulting in $200,000 of additional net income per year. Required: please just the Req 3. 3. Using a discount rate of 10 percent, calculate the net present value of each project. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Using a discount rate of 10 percent, calculate the net present value of each project. Note: Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![PA11-3 (Static) Comparing, Prioritizing Multiple Projects [LO 11-1, 11-2, 11-3, 11-6]
Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time
horizon, management is finding it difficult to compare them. Assume straight line depreciation method is used. (Future Value of $1.
Present Value of $1. Future Value Annuity of $1. Present Value Annuityof $1.)
Note: Use appropriate factor(s) from the tables provided.
Project 1: Retooling Manufacturing Facility
This project would require an initial investment of $4,850,000. It would generate $865,000 in additional net cash flow each year. The
new machinery has a useful life of eight years and a salvage value of $1,000,000.
Project 2: Purchase Patent for New Product
The patent would cost $3,400,000, which would be fully amortized over five years. Production of this product would generate
$425,000 additional annual net income for Hearne.
Project 3: Purchase a New Fleet of Delivery Trucks
Hearne could purchase 25 new delivery trucks at a cost of $115,000 each. The fleet would have a useful life of 10 years, and each
truck would have a salvage value of $5,000. Purchasing the fleet would allow Hearne to expand its customer territory, resulting in
$200,000 of additional net income per year.
Required:
please just the Req 3.
3. Using a discount rate of 10 percent, calculate the net present value of each project.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
Required 4
Using a discount rate of 10 percent, calculate the net present value of each project.
Note: Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.
Net Present Value
Project 1
Project 2
$
788,834.00
Project 3
S
91,873.00
< Required 2
Required 4 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff4a55626-aa14-4be2-9077-ae9ec70b4d77%2Fd8bd3b5f-4f88-427c-9971-466ae1e31c99%2Fxsrjqh_processed.jpeg&w=3840&q=75)
Transcribed Image Text:PA11-3 (Static) Comparing, Prioritizing Multiple Projects [LO 11-1, 11-2, 11-3, 11-6]
Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time
horizon, management is finding it difficult to compare them. Assume straight line depreciation method is used. (Future Value of $1.
Present Value of $1. Future Value Annuity of $1. Present Value Annuityof $1.)
Note: Use appropriate factor(s) from the tables provided.
Project 1: Retooling Manufacturing Facility
This project would require an initial investment of $4,850,000. It would generate $865,000 in additional net cash flow each year. The
new machinery has a useful life of eight years and a salvage value of $1,000,000.
Project 2: Purchase Patent for New Product
The patent would cost $3,400,000, which would be fully amortized over five years. Production of this product would generate
$425,000 additional annual net income for Hearne.
Project 3: Purchase a New Fleet of Delivery Trucks
Hearne could purchase 25 new delivery trucks at a cost of $115,000 each. The fleet would have a useful life of 10 years, and each
truck would have a salvage value of $5,000. Purchasing the fleet would allow Hearne to expand its customer territory, resulting in
$200,000 of additional net income per year.
Required:
please just the Req 3.
3. Using a discount rate of 10 percent, calculate the net present value of each project.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
Required 4
Using a discount rate of 10 percent, calculate the net present value of each project.
Note: Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.
Net Present Value
Project 1
Project 2
$
788,834.00
Project 3
S
91,873.00
< Required 2
Required 4 >
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