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Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $288,000 and would yield the following annual cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)     C1 C2 C3 Year 1   $ 32,000     $ 116,000     $ 200,000   Year 2     128,000       116,000       80,000   Year 3     188,000       116,000       68,000   Totals   $ 348,000     $ 348,000     $ 348,000       1. Assume that the company requires a 9% return from its investments. Using net present value, determine which projects, if any, should be acquired. 2. Using the answer from part 1, is the internal rate of return higher or lower than 9% for Project C2?

Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $288,000 and would yield the following annual cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)     C1 C2 C3 Year 1   $ 32,000     $ 116,000     $ 200,000   Year 2     128,000       116,000       80,000   Year 3     188,000       116,000       68,000   Totals   $ 348,000     $ 348,000     $ 348,000       1. Assume that the company requires a 9% return from its investments. Using net present value, determine which projects, if any, should be acquired. 2. Using the answer from part 1, is the internal rate of return higher or lower than 9% for Project C2?

Essentials Of Investments
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
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Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $288,000 and would yield the following annual cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
 

  C1 C2 C3
Year 1   $ 32,000     $ 116,000     $ 200,000  
Year 2     128,000       116,000       80,000  
Year 3     188,000       116,000       68,000  
Totals   $ 348,000     $ 348,000     $ 348,000  
 

 
1. Assume that the company requires a 9% return from its investments. Using net present value, determine which projects, if any, should be acquired.
2. Using the answer from part 1, is the internal rate of return higher or lower than 9% for Project C2?

Required 1 Required 2 Assume that the company requires a 9% return from its investments. Using net present value, determine which projects, if any, should be acquired. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Project C1 Initial Investment Chart Values are Based on: Year Cash Inflow PV Factor Present Value 1 Project C2 Initial Investment Year Cash Inflow PV Factor Present Value 2 %3D Project C3 Initial Investment Year Cash Inflow PV Factor Present Value 1 2 3 Required 1 Required 2 Using the answer from part 1, is the internal rate of return higher or lower than 9% for Project C2? ......... ......... Is the internal rate of return higher or lower than 9% for Project C2? < Required 1 Required 2>
Transcribed Image Text:Required 1 Required 2 Assume that the company requires a 9% return from its investments. Using net present value, determine which projects, if any, should be acquired. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Project C1 Initial Investment Chart Values are Based on: Year Cash Inflow PV Factor Present Value 1 Project C2 Initial Investment Year Cash Inflow PV Factor Present Value 2 %3D Project C3 Initial Investment Year Cash Inflow PV Factor Present Value 1 2 3 Required 1 Required 2 Using the answer from part 1, is the internal rate of return higher or lower than 9% for Project C2? ......... ......... Is the internal rate of return higher or lower than 9% for Project C2? < Required 1 Required 2>
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