Net Present Value-Unequal LivesProject 1 requires an original investment of $65,200. The project will yield cash flows of $14,000 per year for 5 years. Project 2 has a computed net present value of $15,700 over a three-year life. Project 1 could be sold at the end ofthree years for a price of $65,000.Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below.Present Value of $1 at Compound Interest10%0.9090.8260.7510.683Year123456789101234567896%100.9430.8900.8400.7920.7470.7050.6650.6270.5920.5582.6733.4654.2124.9175.5826.2100.6210.5640.5130.4670.4240.386Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%0.9430.8701.8331.6262.2832.8556.8027.3600.9091.7362.4873.1703.7914.3554.86812%5.3355.7596.1450.8930.7970.7120.6360.5670.5070.4520.4040.3610.3220.8931.6902.4023.0373.6054.1114.5644.96815%5.3285.6500.8700.7560.6580.5720.4970.4320.3760.3270.2840.2473.3533.7854.1604.48720%4.7725.0190.8330.6940.5790.4820.4020.3350.2790.2330.1940.1620.8331.5282.1062.5892.9913.3263.6053.8374.0314.192 a. Determine the net present value of Project 1 over a three-year life with residual value, assuming a minimum rate of return of 10%. If required, round to the nearest dollar.b. Which project provides the greatest net present value?

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Project 1 requires an original investment of $65,200. The project will yield cash flows of $14,000 per year for 5 years. Project 2 has a computed net present value of $15,700 over a three-year life. Project 1 could be sold at the end of three years for a price of $65,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest 6% 10% 20% 0.943 0.909 0.833 0.890 0.826 0.797 0.694 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.665 0.452 0.376 0.279 0.513 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 0.194 0.247 0.162 0.558 0.386 0.322 Year 1 2 3 4 5 6 7 8 9 10 12% 15% 0.893 0.870 0.756 Present Value of an Annuity of $1 at Compound Interest Year 6% 12% 15% 10% 20% 0.943 0.909 0.893 0.870 0.833 1.833 1.626 1.528 1.736 1.690 2.487 2.402 2.283 2.106 3.037 2.855 2.589 3.170 3.791 3.605 3.353 2.991 4.355 4.111 3.785 3.326 4.868 4.564 4.160 3.605 5.335 4.968 4.487 3.837 5.759 5.328 4.772 4.031 5.019 4.192 1 2 3 4 5 6 7 8 9 10 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 6.145 5.650

Project 1 requires an original investment of $65,200. The project will yield cash flows of $14,000 per year for 5 years. Project 2 has a computed net present value of $15,700 over a three-year life. Project 1 could be sold at the end of three years for a price of $65,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest 6% 10% 20% 0.943 0.909 0.833 0.890 0.826 0.797 0.694 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.665 0.452 0.376 0.279 0.513 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 0.194 0.247 0.162 0.558 0.386 0.322 Year 1 2 3 4 5 6 7 8 9 10 12% 15% 0.893 0.870 0.756 Present Value of an Annuity of $1 at Compound Interest Year 6% 12% 15% 10% 20% 0.943 0.909 0.893 0.870 0.833 1.833 1.626 1.528 1.736 1.690 2.487 2.402 2.283 2.106 3.037 2.855 2.589 3.170 3.791 3.605 3.353 2.991 4.355 4.111 3.785 3.326 4.868 4.564 4.160 3.605 5.335 4.968 4.487 3.837 5.759 5.328 4.772 4.031 5.019 4.192 1 2 3 4 5 6 7 8 9 10 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 6.145 5.650

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Subject:
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