Project A requires an original investment of $50,900. The project will yield cash flows of $14,800 per year for 4years. Project B has a computed net present value of $2,910 over a 4-year life. Project A could be sold at the end of4 years for a price of $14,500.Following is a table for the present value of $1 at compound interest:Year6%10%12%0.9430.9090.8930.8900.8260.79730.8400.7510.71240.7920.6830.63650.7470.6210.567Following is a table for the present value of an annuity of $1 at compound interest:Year6%10%12%0.9430.9090.8931.8331.7361.69032.6732.4872.40243.4653.1703.03754.2123.7913.605Use the tables above.2.2. Use the tables above.a. Determine the net present value of Project A over a 4-year life with salvage value assuming a minimum rate ofreturn of 12%. Round your answer to two decimal places.b. Which project provides the greatest net present value?

Calculate the net present value as follows: Net present value = Present value of cash inflows -…

Answered: Project A requires an original…

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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Net Present Value A project has estimated annual net cash flows of $15,000 for three years and is estimated to cost $47,500. Assume a minimum acceptable rate of return of 10%. Use the Present Value of an Annuity of $1 at Compound Interest table below. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) $fill in the blank 1 Present value index (rounded to two decimal places) fill in the blank 2
A project has estimated annual net cash flows of $147,000 for 4 years and is estimated to cost $475,500. Assume a minimum acceptable rate of return of 10%. Use the Present Value of an Annuity of $1 at Compound Interest table below. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Determine (1) the net present value of the project and (2) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) $fill in the blank 1 Present value index (rounded to two decimal places) fill in the blank 2 Feedback…
Net Present Value A project has estimated annual net cash flows of $7,500 for three years and is estimated to cost $45,000. Assume a minimum acceptable rate of return of 10%. Use the Present Value of an Annuity of $1 at Compound Interest table below. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places)
Project X has an upfront $3.5 million capital expe which is converted into an equivalent seven year annuity at a discount rate of 8% per year. Project Z has a $7 million initial capital outlay and will last for 14 years. Project Z has the same discount rate as Project X. What is the annualized capital cost of Project X? O $766,912 O $742,753 O $528,050 O $672,253
Net Present Value A project has estimated annual net cash flows of $5,000 for five years and is estimated to cost $32,500. Assume a minimum acceptable rate of return of 15%. Use the Present Value of an Annuity of $1 at Compound Interest table below. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.893 1 0.943 0.909 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 2.487 2.673 2.402 2.283 2.106 3.465 3.037 2.589 4 3.170 2.855 3.791 5 4.212 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 4.564 7 5.582 4.868 4.160 3.605 4.968 8 6.210 5.335 4.487 3.837 4.772 9 6.802 5.759 5.328 4.031 5.650 5.019 10 7.360 6.145 4.192 Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places)
Project A requires an original investment of $64,300. The project will yield cash flows of $19,600 per year for seven years. Project B has a calculated net present value of $3,760 over a four-year life. Project A could be sold at the end of four years for a price of $14,000. Below is a table for the present value of $1 at Compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Below is a table for the present value of an annuity of $1 at compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 Use the tables above. (a) Using the present value tables above, determine the net present value of Project A over a four-year life with salvage value assuming a minimum rate of return of 12%. Round your answer to two decimal places. Enter negative values as negative numbers.$fill in the blank 1 (b) Which…
A company is considering an iron ore extraction project that requires an initial investment of $508,000 and will yield annual cash inflows of $152,000 for four years. The company's discount rate is 9%. What is the NPV of the project? Present value of an ordinary annuity of $1: 8% 9% 10% 1 2 3 4 5 6 7 8 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 OA $101,600 OB. $15,520 OC. $(15,520) OD. $(101,000) 0.917 1.759 2.531 3.24 3.89 4.486 5.033 5.535 0.909 1.736 2.487 3.17 3.791 4.355 4.668 5.335
Net present value—unequal lives Project 1 requires an original investment of $375,000. The project will yield cash flows of $90,000 per year for 8 years. Project 2 has a computed net present value of $50,000 over a 6-year life. Project 1 could be sold at the end of 6 years for a price of $40,000. 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 Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3…
Compute the discounted payback statistic for Project C if the appropriate cost of capital is 8 percent and the maximum allowable discounted payback period is three years. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project C Time: 1 3 4 Cash flow: -$1,900 $840 $750 $790 $480 $280 Discounted payback period years Should the project be accepted or rejected?
A company is considering an iron ore extraction project that requires an initial investment of $1,200,000 and will yield annual cash inflows of $534,283 for three years. The company's discount rate is 9%. Calculate IRR. Present value of ordinary annuity of $1: 10% 12% 14% 15% 16% 18% 20% 1 0.909 0.893 0.877 0.870 0.862 0.847 0.833 1.736 1.690 1.647 1.626 1.605 1.566 1.528 3 2.487 2.402 2.322 2.283 2.246 2.174 2.106 4 3.170 3.037 2.914 2.855 2.798 2.690 2.589 OA. 16% OB. 15% D OC. 14% O OD. 18%
Net Present Value—Unequal Lives Project 1 requires an original investment of $63,800. The project will yield cash flows of $13,000 per year for five years. Project 2 has a calculated net present value of $15,600 over a three-year life. Project 1 could be sold at the end of three years for a price of $56,000. 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 Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690…
An investment will pay $21,600 at the end of the first year, $31,600 at the end of the second year, and $51,600 at the end of the third year. (FV of $1. PV of $1. EVA of $1, and PVA of $1) Note: Use the appropriate factor(s) from the tables provided. Required: Determine the present value of this investment using a 9 percent annual interest rate. Note: Round your intermediate calculations and final answer to nearest whole dollar. Present value of investment

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