Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $222,000 and would yield the following annual net cash flows. (PV of $1. EV of $1. PVA of $1, and EVA of $1) Note: Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals Project C1 $ 10,000 106,000 166,000 $ 282,000 Project C2 $ 94,000 94,000 94,000 $ 282,000 a. The company requires a 12% 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 12% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B The company requires a 12% 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. Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Show more Project C1 Year 1 Net Cash Flows X Present Value of 1 at 12% Present Value of Net Cash Flows Year 2 Year 3 Totals $ Project C2 Net Cash Flows x Present Value of 1 at 12% Year 1 = Year 2 = Year 3 Totals $ 0 Which projects, if any, should be accepted Present Value of Net Cash Flows
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $222,000 and would yield the following annual net cash flows. (PV of $1. EV of $1. PVA of $1, and EVA of $1) Note: Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals Project C1 $ 10,000 106,000 166,000 $ 282,000 Project C2 $ 94,000 94,000 94,000 $ 282,000 a. The company requires a 12% 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 12% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B The company requires a 12% 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. Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Show more Project C1 Year 1 Net Cash Flows X Present Value of 1 at 12% Present Value of Net Cash Flows Year 2 Year 3 Totals $ Project C2 Net Cash Flows x Present Value of 1 at 12% Year 1 = Year 2 = Year 3 Totals $ 0 Which projects, if any, should be accepted Present Value of Net Cash Flows
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $222,000 and would yield
the following annual net cash flows. (PV of $1. EV of $1. PVA of $1, and EVA of $1)
Note: Use appropriate factor(s) from the tables provided.
Net cash flows
Year 1
Year 2
Year 3
Totals
Project C1
$ 10,000
106,000
166,000
$ 282,000
Project C2
$ 94,000
94,000
94,000
$ 282,000
a. The company requires a 12% 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 12% for (i) Project C1 and (ii) Project C2? Hint: It is
not necessary to compute IRR to answer this question.
Complete this question by entering your answers in the tabs below.
Required A Required B
The company requires a 12% 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.
Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals.
Show more
Project C1
Year 1
Net Cash Flows
X
Present Value
of 1 at 12%
Present Value of
Net Cash Flows
Year 2
Year 3
Totals
$
Project C2
Net Cash Flows
x
Present Value
of 1 at 12%
Year 1
=
Year 2
=
Year 3
Totals
$
0
Which projects, if any, should be accepted
Present Value of
Net Cash Flows
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