Perit Industries has $175,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternativesare:Cost of equipment requiredWorking capital investment requiredAnnual cash inflowsSalvage value of equipment in six yearsLife of the projectProject A$ 175,000Project B$ 0$ 0$ 175,000$ 27,000$ 44,000$ 8,8006 years$ 06 yearsThe working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discountrate is 15%.Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables.Required:1. Compute the net present value of Project A.Note: Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.2. Compute the net present value of Project B.Note: Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.3. Which investment alternative (if either) would you recommend that the company accept?1. Net present value project A2. Net present value project B3. Which investment alternative (if either) would yourecommend that the company accept?

The objective of this question is to calculate the net present value (NPV) of two investment…

Answered: Perit Industries has $175,000 to…

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

Santana Co. is evaluating a project requiring a capital expenditure of $790,000. The project has an estimated life of 4 years and no salvage value. The estimated net income and net cash flow from the project are as follows: Year Net Income Net Cash Flow 1 $ 75,000 $280,000 2 100,000 300,000 3 109,000 200,000 4 36,000 120,000 $320,000 $900,000 The company's minimum desired rate of return is 9%. The present value of $1 at compound interest of 9% for 1, 2, 3, and 4 years is 0.9174, 0.8417, 0.7722, and 0.7084 respectively. Determine the net present value of the project. Should Santana proceed?
Flounder Manufacturing Company is considering three new projects, each requiring an equipment investment of $23,800. Each project will last for 3 years and produce the following cash flows. Year 1 2 3 Total AA $7,600 $10,300 9,600 15,600 (a) $32,800 BB Payback period 10,300 Click here to view PV tables. 10,300 Most desirable $30,900 The salvage value for each of the projects is zero. Flounder uses straight-line depreciation. Flounder will not accept any project with a payback period over 2.2 years. Flounder's minimum required rate of return is 12%. Least desirable CC $11,600 10,600 9,600 Compute each project's payback period. (Round answers to 2 decimal places, e.g. 52.75.) $31,800 AA years BB Indicating the most desirable project and the least desirable project using this method. years CC years
Sheridan Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $172,000 $190,000 $214,000 Annual net income: Year 1 15,120 19,440 29,160 2 15,120 18,360 24,840 3 15,120 17,280 22,680 4 15,120 12,960 14,040 5 15,120 9,720 12,960 Total $75,600 $77,760 $103,680 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view the factor table. (a) × Your answer is incorrect. Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) Project Bono 11.38 years Project Edge 9.77 years Project Clayton 7.34 years
Perit Industries has $155,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project $ 155,000 Project A $ 0 Project B $ 0 $ 155,000 $ 25,000 $ 8,600 $ 40,000 6 years $ 0 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 14%. Click here to view Exhibit 12B-1 and Exhibit 12B-2. to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2 Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would you…
Give typing answer with explanation and conclusion
A tunnel to transport water initially cost $1,000,000 and has expected maintenance costs that will occur in a 6-year cycle as shown below, assume MARR is 5% per year. End of Year: 2 4 6. Maintenance: $35,000 $35,000 $35,000 $45,000 $45,000 $60,000 Compute the Equivalent Annual Cost of the maintenance. Hint: Don't insert the negative sign Compute the Capitalized Cost? Hint: Don't insert the negative sign
The following information relates to three possible capital expenditure projects. Because of capital rationing only one project can be accepted. Project A Project B Project C Initial Cost 240,000.00 260,000.00 200,000.00 Expected life 5 5 4 Scrap value expected 10,000.00 15,000.00 10,000.00 Expected Cash Inflows: End Year 1 85,000.00 95,000.00 45,000.00 End Year 2 70,000.00 70,000.00 65,000.00 End Year 3 65,000.00 55,000.00 95,000.00 End Year 4 60,000.00 50,000.00 100,000.00 End Year 5 50,000.00 50,000.00 The company estimates cost of capital is 18%. The table below shows the present value of $1 at 14%, 18% and 22%. Periods 14% 18% 22% 1 0.877 0.847 0.820 2 0.769 0.718 0.672 3 0.675 0.609 0.551 4 0.592 0.516 0.451 5 0.519 0.437 0.370 6 0.456 0.370 0.303 Required: Calculate:(b) The accounting rate of return for each…
Subject- account
None
Please help me
Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Project Investment AnnualIncome Life ofProject 22A $243,600 $17,130 6 years 23A 271,500 20,700 9 years 24A 280,600 15,700 7 years Annual income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Iggy Company uses the straight-line method of depreciation.(a) Determine the internal rate of return for each project. (Round answers 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Project Internal Rate ofReturn 22A % 23A % 24A % If Iggy Company’s required rate of return is 11%, which projects are acceptable?
Pina Colada Manufacturing Company is considering three new projects, each requiring an equipment investment of $25,600. Each project will last for 3 years and produce the following cash flows. Year 1 2 3 AA BB $8,200 $11,100 $12,200 11,200 10,200 16,200 Total $34,600 (a) 11,100 11,100 Payback period $33,300 CC 10,200 The salvage value for each of the projects is zero. Pina Colada uses straight-line depreciation. Pina Colada will not accept any project with a payback period over 2.2 years, Pina Colada's minimum required rate of return is 12%. Click here to view PV tables. $33,600 Compute each project's payback period: (Round answers to 2 decimal places, e.g. 52.75.) AA years BB years CC years

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS