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Survey of Accounting (Accounting I)

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.15E

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Problem 5-(20 points) A company is building a powerplant. It is considering three alternatives. Based on Annual Worth (AW),
determine which project should be chosen. The estimated revenues and costs are as follows
A
B
Initial Investment
Annual Revenues
100
160
20
25
Annual expenses
Salvage value
8
10
18
8
12222
C
220
55
25
Annual Worth =
Project life (years)
40
Selected Project =
Interest Rate
5%
Reason:
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Problem 2. Based on benefit to cost ratio, determine which project should be chosen. Please work out in excel spreadsheet.
hi, could u explain how to solve plan B thx
i need the answer quickly
Q which project will be the best using (EAW). S Using the Benefit-Cost Ratio Method, Find what is the best alternative from the projects listed below if u know that (-10%) for both project. Details Initial investment (CU) Annual revenue (CU/year) Annual expense (CU/year) Project life (year) Investment due to replacement of some machines every 3 years. Salvage value (CU) Purchasing a new machine in the seventh year. 0 -113 000 Alternative 1 300 000 50 000 15 500 1 30 000 5 13 500 Q5:A person is planning a new business, the initial investment and cash flow pattern for a new business are shown below: Non Non 2 Year Cash flow (CU) The expected life of the project is five year.Find the rate of return for a new business. 30 000 3 30 000 Alternative 2 200 000 75 000 29 000 10 Non 4 30 000 22 000 13 000 5 30 000
Subject: acounting
Subject: Engineering Economy
An interior design studio is trying to choose between the following two mutually exclusive design projects: Year 0 1 2 3 Cash Flow Cash Flow (0) -$64,000 31,000 31,000 31,000 a-1 If the required return is 10 percent, what is the profitability index for both projects? (Round your answers to 3 decimal places. (e.g., 32.161)) Project I Project II -$18,000 9,700 9,700 9,700 Profitability Index a-2 If the company applies the profitability index decision rule, which project should the firm accept? O Project I O Project II Project I Project II b-1 What is the NPV for both projects? (Round your answers to 2 decimal places. (e.g., 32.16)) O Project I Project II NPV b-2lf the company applies the NPV decision rule, which project should it take?
Question Five: for an investment project which is shown its payment details in Figure (2), it is desired to evaluate the project economically to decide accept the project or no. Choose the correct answer for the following: Figure (2) A=$8000 HIGHF 3 A=$5000 i=20% $20,000 $10,000
7
1
The following table contains information about four potential investment projects that Castle Corporation is considering. Payback Period Required Investment $ 900,000 $ 1,150,000 $ 1,400,000 $ 1,900,000 Project B с D Project Life 5 Required 1 ARR 39.00% 21.00% 22.50% 22.20% Complete this question by entering your answers in the tabs below. 1st preferred 2nd preferred 3rd preferred 4th preferred 3.6 4.8 4.5 2.5 Required: 1. Rank the four projects in order of preference under each method indicated by the headers: 2. Which method is the best for evaluating the investments? Profitability Index 2.19 1.98 1.61 1.56
Question 2: Evaluating investment projects You are planning to invest $30,000 in research & development (R&D). This investment will generate cost savings of $21,000 in year 1 and $15,000 in year 2. After 2 years, the salvage value is zero. The cost of capital is 25% a year. a) Compute the net present value. NPV = $ Should you invest? OYES ONO b) Following a government stimulus program, the cost of capital decreased to 10% a year. Compute the net present value at the new cost of capital. NPV = $ Should you invest now? OYES ONO c) The economy is at full employment and is beginning to overheat (i.e., total demand exceeds the available capacity, which leads to rapid price increases). Firms' investment activity increases total demand and contributes to economic overheating. To prevent high inflation, the Federal Reserve chairman wants to reduce firms' investment activity. The Federal Reserve can control the cost of capital in the economy by adjusting its benchmark interest rate. To reduce…

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