Project A requires an original investment of $55,700. The project will yield cash flows of $16,200 per year for seven years. Project B has a calculated net present value of $3,470 over a four-year life. Project A could be sold at the end of four years for a price of $14,800. Below is a table for the present value of $1 at Compound interest. Year 10% 0.909 0.826 0.751 0.683 0.621 1 2 3 4 1 2 5 Below is a table for the present value of an annuity of $1 at compound interest. Year 10% 12% 0.909 0.893 1.736 1.690 2.487 2.402 3.170 3.037 3.791 3.605 3 6% 0.943 0.890 0.840 0.792 0.747 4 6% 0.943 1.833 2.673 3.465 12% 0.893 0.797 0.712 0.636 0.567 5 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. 4.212 (b) Which project provides the greatest net present value?
Project A requires an original investment of $55,700. The project will yield cash flows of $16,200 per year for seven years. Project B has a calculated net present value of $3,470 over a four-year life. Project A could be sold at the end of four years for a price of $14,800. Below is a table for the present value of $1 at Compound interest. Year 10% 0.909 0.826 0.751 0.683 0.621 1 2 3 4 1 2 5 Below is a table for the present value of an annuity of $1 at compound interest. Year 10% 12% 0.909 0.893 1.736 1.690 2.487 2.402 3.170 3.037 3.791 3.605 3 6% 0.943 0.890 0.840 0.792 0.747 4 6% 0.943 1.833 2.673 3.465 12% 0.893 0.797 0.712 0.636 0.567 5 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. 4.212 (b) Which project provides the greatest net present value?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 3BE
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Project A requires an original investment of $55,700. The project will yield cash flows of $16,200 per year for seven years. Project B has a calculated net present value of $3,470 over a four-year life. Project A could be sold at the
end of four years for a price of $14,800.
Below is a table for the present value of $1 at Compound interest.
Year
1
2
3
4
5
Year
1
2
3
4
6%
5
0.943
0.890
0.840
0.792
0.747
6%
0.943
1.833
2.673
3.465
10%
0.621
Below is a table for the present value of an annuity of $1 at compound interest.
12%
4.212
0.909
0.826
0.751
0.683
10%
0.909
1.736
2.487
12%
0.893
3.170
3.791
0.797
0.712
0.636
0.567
0.893
1.690
2.402
3.037
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.
(b) Which project provides the greatest net present value?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcdb469f5-07ec-4572-9b6b-17976ac5f171%2F51abdfae-f6b9-4de2-8eee-e330f6431553%2Fl4p23z6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:)
Project A requires an original investment of $55,700. The project will yield cash flows of $16,200 per year for seven years. Project B has a calculated net present value of $3,470 over a four-year life. Project A could be sold at the
end of four years for a price of $14,800.
Below is a table for the present value of $1 at Compound interest.
Year
1
2
3
4
5
Year
1
2
3
4
6%
5
0.943
0.890
0.840
0.792
0.747
6%
0.943
1.833
2.673
3.465
10%
0.621
Below is a table for the present value of an annuity of $1 at compound interest.
12%
4.212
0.909
0.826
0.751
0.683
10%
0.909
1.736
2.487
12%
0.893
3.170
3.791
0.797
0.712
0.636
0.567
0.893
1.690
2.402
3.037
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.
(b) Which project provides the greatest net present value?
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