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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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INFORMATION The management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each of which requires an initial investment of R2 500 000. The following information is presented to you: PROJECT TAN 5.1 5.2 5.3 Year 5.4 1 5.5 2 3 5 PROJECT COS Net Profit R 130 000 130 000 130 000 130 000 130 000 Net Profit R 80 000 A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated using the straight-line method. 180 000 Use the information provided above to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 120 000 220 000 50 000 Payback Period of Project Tan (expressed in years, months and days). Net Present Value of Project Tan. Accounting Rate of Return on average investment of Project Tan (expressed to two decimal places). Benefit Cost Ratio of Project Cos (expressed to three decimal places). Internal Rate of…
hi, could u explain how to solve plan B thx
A1
Coffer Company is analyzing two potential investments. Cost of machine Project X $ 97,090 Net cash flow: Year 1 Year 2 Year 3 Year 4 Project Y $ 72,000 36,500 3,700 36,500 33,500 36,500 33,500 0 13,000 If the company is using the payback period method, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice ○ Project Y. ○ Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project. Project Y because it has a lower Initial Investment.
EconomicS 2. Referring to the given data in 6.7/317 at the end of Chapter 6 (Engineering Economy by Sullivan et al), select the best alternative using: (a) PW (b) AW © FW (d) IRR 6-7. Three mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given next. The MARR is 20% per year. At the conclusion of the useful life, the investment will be sold. A в $28,000 $55,000 $40,000 Annual expenses $15,000 $13,000 $22,000 Annual revenues $23,000 $28,000 $32,000 $6,000 $8,000 $10,000 Investment cost Market value Useful life 10 years 10 years 10 years 26.4% 24.7% 22.4% IRR A decision-maker can select one of these alternatives or decide to select none of them. Make a recommendation using the PW method. (6.4)
Porter Company is analyzing two potential Investments. Project X $ 75,900 Initial investment Net cash flow: Year 1 Year 2 Year 3 Year 4 Multiple Choice O If the company is using the payback period method, and it requires a payback of three years or ess, which project(s) should be selected? Project Y. 26,000 26,000 26,000 0 Project X. Project Y $ 64,000 Both X and Y are acceptable projects. 4,400 28,000 28,000 20,000 Neither X nor Y is an acceptable project. Project Y because it has a lower Initial Investment.
Coffer Company is analyzing two potential investments. Project X Cost of machine Net cash flow: Year 1 Year 2 $ 85,470 Project Y $ 65,000 33,000 33,000 3,000 30,000 Year 3 Year 4 33,000 0 • 30,000 25,000 If the company is using the payback period méthod, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice Project Y. Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project.
Subject: acounting
Subject: Engineering Economy
vnt.2
A company is looking at five different potential projects, but it can only do one of them. Which project should the company select? For this question, use the following information: Project A B. D Initial Investment -3,300 -6,500 -5,300 -7,000 -5,500 Annual Benefit 650 1,200 950 1,250 1,000 Salvage Value 150 425 300 1,000 200 Useful life 10 10 10 10 10 IRR 14.99% 13.51% 12.74% 13.26% 12.93% E-A C-A B-A D-A D-B Delta IRR 9.68% 8.88% 11.97% 11.78% 10.90% C-E B-E D-E B-C D-C Delta IRR 18.90% 16.44% 14,29% 16.79% 14.71% Which project should be selected if MARR is 10% (mutually exclusive)? A OD OB OE
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