Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $264,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Project Cl $ 24,000 120,000 180,000 Project C2 $ 108,000 108,000 108,000 $ 324,000 $ 324,000 Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. (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 Year 1 Year 2 Year 3 Totals Initial investment Present value of cash inflows Project C2 Year 1 Year 2 Year 3 Net Cash Flows x $ $ Net Cash Flows $ $ 24,000 X 120,000 X 180,000 X 324,000 Totals Initial investment Present value of cash inflows Which projects, if any, should be accepted 108,000 108,000 108,000 324,000 X X x X Present Value of 1 at 10% 0.9090 0.8260 X = 0.7534 X = Present Value of 1 at 10% 0.9090 0.8260 0.7534 = = Present Value of Net Cash Flows $ $ $ 21,622 97,395 $ 135,612 254,629 264,000 (13,369) Present Value of Net Cash Flows $ 97,297 89,208 81,367 267,872 264,000 $ Project C1 (79) X
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $264,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Project Cl $ 24,000 120,000 180,000 Project C2 $ 108,000 108,000 108,000 $ 324,000 $ 324,000 Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. (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 Year 1 Year 2 Year 3 Totals Initial investment Present value of cash inflows Project C2 Year 1 Year 2 Year 3 Net Cash Flows x $ $ Net Cash Flows $ $ 24,000 X 120,000 X 180,000 X 324,000 Totals Initial investment Present value of cash inflows Which projects, if any, should be accepted 108,000 108,000 108,000 324,000 X X x X Present Value of 1 at 10% 0.9090 0.8260 X = 0.7534 X = Present Value of 1 at 10% 0.9090 0.8260 0.7534 = = Present Value of Net Cash Flows $ $ $ 21,622 97,395 $ 135,612 254,629 264,000 (13,369) Present Value of Net Cash Flows $ 97,297 89,208 81,367 267,872 264,000 $ Project C1 (79) X
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:Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $264,000 and would yield
the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Net cash flows.
Year 1
Year 2
Year 3
Totals
a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to
determine which projects, if any, should be accepted.
b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not
necessary to compute IRR to answer this question.
Required A
Project C1
$ 24,000
120,000
180,000
$ 324,000
Complete this question by entering your answers in the tabs below.
Required B
Project C1
Year 1
Year 2
Year 3
Year 1
Year 2
Year 3
The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in
Appendix B to determine which projects, if any, should be accepted. (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.)
Totals
Initial investment
Present value of cash inflows
Project C2
Net Cash Flows
$
Project C2
$ 108,000
108,000
108,000
$ 324,000
$
$
Net Cash Flows
Totals
Initial investment
Present value of cash inflows
Which projects, if any, should be accepted
$
24,000✔ X
120,000✔✓ x
180,000 ✓ X
324,000
Answer is not complete.
X
108,000✔ x
108,000 ✓ X
108,000✔✔✔ X
324,000
Present
Value of 1 at
10%
0.9090
0.8260 x
0.7534 =
Present
Value of 1 at
10%
< Required A
=
=
=
B
0.9090
0.8260 =
0.7534
=
=
Present
Value of Net
Cash Flows
$
✓
× $
$
21,622 X
97,395 X
135,612
254,629
Present
Value of Net
Cash Flows
Required B
264,000✔
(13,369) X
97,297 X
89,208
81,367
267,872
264,000✔
(79) X
X
✓
X $
Project C1
>
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