Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $330,000 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 Project C1 Project C2 Year 1 $ 46,000 $ 130,000 Year 2 142,000 130,000 Year 3 202,000 130,000 Totals $ 390,000 $ 390,000 a. The company requires a 8% 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 8% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $330,000 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 Project C1 Project C2 Year 1 $ 46,000 $ 130,000 Year 2 142,000 130,000 Year 3 202,000 130,000 Totals $ 390,000 $ 390,000 a. The company requires a 8% 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 8% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.
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
Related questions
Question
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $330,000 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 | Project C1 | Project C2 |
---|---|---|
Year 1 | $ 46,000 | $ 130,000 |
Year 2 | 142,000 | 130,000 |
Year 3 | 202,000 | 130,000 |
Totals | $ 390,000 | $ 390,000 |
a. The company requires a 8%
b. Using the answer from part a, is the
![Complete this question by entering your answers in the tabs below.
Required A Required B
Using the answer from part a, is the internal rate of return higher or lower than 8% for (i) Project C1 and (ii) Project
C2? Hint: It is not necessary to compute IRR to answer this question.
(i) Is the internal rate of return higher or lower than 8% for Project C1?
(ii) is the internal rate of return higher or lower than 8% for Project C2?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F46113f6c-7f9a-48f7-8ab3-e48360939fbf%2Fd6e93b1b-c96c-40c5-b5b3-d0732b3035a8%2F191pzro_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required A Required B
Using the answer from part a, is the internal rate of return higher or lower than 8% for (i) Project C1 and (ii) Project
C2? Hint: It is not necessary to compute IRR to answer this question.
(i) Is the internal rate of return higher or lower than 8% for Project C1?
(ii) is the internal rate of return higher or lower than 8% for Project C2?
![Required A
Required B
The company requires a 8% 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
Net Cash Flows X
$
46,000 X
142,000 X
202,000 X
390,000
Totals
$
Present value of cash inflows
Net present value
Project C2
Year 1
Year 2
Year 3
Net Cash Flows
$
X
130,000 x
130,000 X
130,000 X
390,000
Totals
$
Present value of cash inflows
Net present value
Which projects, if any, should be accepted
Present Value
of 1 at 8%
Present Value
of 1 at 8%
=
II
11
=
II
Present Value of
Net Cash Flows
Present Value of
Net Cash Flows](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F46113f6c-7f9a-48f7-8ab3-e48360939fbf%2Fd6e93b1b-c96c-40c5-b5b3-d0732b3035a8%2F8k8cbhv_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required A
Required B
The company requires a 8% 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
Net Cash Flows X
$
46,000 X
142,000 X
202,000 X
390,000
Totals
$
Present value of cash inflows
Net present value
Project C2
Year 1
Year 2
Year 3
Net Cash Flows
$
X
130,000 x
130,000 X
130,000 X
390,000
Totals
$
Present value of cash inflows
Net present value
Which projects, if any, should be accepted
Present Value
of 1 at 8%
Present Value
of 1 at 8%
=
II
11
=
II
Present Value of
Net Cash Flows
Present Value of
Net Cash Flows
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education