(c)Compute the annual rate of return for each project. (Round answers to 1 decimal place, e.g. 15.2.)Annual rate of returnSave for LaterProject RedWhich project should Pronghorn select?Save for Later%Project Blue%Attempts: 0 of 1 usedAttempts: 0 of 1 usedSubmit AnswerSubmit Answer Pronghorn Company is considering two capital investment proposals. Relevant data on each project are as follows:Capital investmentAnnual net incomeEstimated useful lifeClick here to view PV tables.(a)(b)Project Red$474,00038,0008 yearsDepreciation is computed by the straight-line method with no salvage value. Pronghorn requires an 8% rate of return on all new investments. The present value of 1 for 8 periods at 8% is 0.54027 and the present value of an annuity of 1 for 8 periods is5.74664.Cash payback periodProject BlueNet present value $674,000Your answer has been saved. See score details after the due date.Compute the cash payback period for each project. (Round answers to 1 decimal place, e.g. 15.2.)Save for Later73,0008 yearsProject RedProject Red4.9 yearsCompute the net present value for each project. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answers to O decimal places, e.g. 5,275.)Project Blue$4.3Project BlueyearsAttempts: 1 of 1 usedAttempts: 0 of 1 usedSubmit Answer

(a) Cash payback period for each project: Project Red…

Pronghorn Company is considering two capital investment proposals. Relevant data on each project are as follows: Project Red $474,000 38,000 8 years Capital investment Annual net income Estimated useful life Project Blue 674,000 73,000 8 years Depreciation is computed by the straight-line method with no salvage value. Pronghorn requires an 8% rate of return on al 5.74664. Click here to view PV tables.

Pronghorn Company is considering two capital investment proposals. Relevant data on each project are as follows: Project Red $474,000 38,000 8 years Capital investment Annual net income Estimated useful life Project Blue 674,000 73,000 8 years Depreciation is computed by the straight-line method with no salvage value. Pronghorn requires an 8% rate of return on al 5.74664. Click here to view PV tables.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

A proposed cost-saving device has an installed cost of $730,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $140,000, the marginal tax rate is 22 percent, and the project discount rate is 10 percent. The device has an estimated Year 5 salvage value of $101,000. What level of pretax cost savings do we require for this project to be profitable? (MACRS schedule) (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Pretax cost savings $ 216,693.04
Required information. [The following information applies to the questions displayed below.] Project Y requires a $331,500 investment for new machinery with a five-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1. FV of $1. PVA of $1. and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation). Depreciation Machinery Selling, general, and administrative expenses Income Years 1-5 4. Determine Project Y's net present value using 9% as the discount rate. Note: Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole dollar. Net present value Not Cash Flows Project Y $ 400,000 Present Value of Annuity at 9% 179,200 66,300 29,000 $ 125,500 Present Value of Net Cash Flows
Coronado, Inc. is considering purchasing equipment costing $39000 with a 7-year useful life. The equipment will provide cost savings of $8700 and will be depreciated straight-line over its useful life with no salvage value. Coronado Inc. requires a 9% rate of return. What is the approximate internal rate of return for this investment? Period 7 10% O 11% 000 9% 8% 7% 5.389 8% Present Value of an Annuity of 1 5.206 9% 5.033 10% 4.868 11% 4.712 14% 4.288
The following data are accumulated by Lone Peak Inc. in evaluating two competing capital investment proposals: 3D Printer Truck Amount of investment $64,000 $24,000 Useful life 4 years 7 years Estimated residual value 0 0 Estimated total income over the useful life $7,680 $9,240 Determine the expected average rate of return for each proposal. If required, round your answers to one decimal place. 3D Printer % Truck %
Current Attempt in Progress Blossom Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Annual Life of Project Investment Income Project 22A $240,400 $16,700 6 years 23A 273,200 20,740 9 years 24A 281,300 15,700 7 years Annual net income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Blossom Company uses the straight-line method of depreciation. Click here to view PV table. (a) Determine the internal rate of return for each project. (Round answers O decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Project 22A 23A 24A Internal Rate of Return % do % %
Wildhorse Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $435,000, has an expected useful life of 11 years and a salvage value of zero, and is expected to increase net annual cash flows by $74,600. Project B will cost $253,000, has an expected useful life of 11 years and a salvage value of zero, and is expected to increase net annual cash flows by $45,200. A discount rate of 10% is appropriate for both projects. Click here to view PV table.Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value - Project A $enter the number rounded to 2 decimal places…
Egy Company is considering three capital expenditure projects. Relevant data for the projects are as follows Project Investment 22A $243.300 23A 274.200 24A 280,500 Project 22A Annual Income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Iggy Company uses the straight-line method of depreciation Click here to view the factor table (a) 23A Annual Income $16.860 Determine the internal rate of return for each project. (Round answers O decimal places, eg: 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided) 24A 20,730 15,700 (b) Life of Project 6 years 9 years 7 years Internal Rate of Return If Iggy Company's required rate of return is 11%, which projects are acceptable The following project(s) are acceptable
A 5-year project is estimated to cost $700,000 and have no residual value. If the straight-line depreciation method is used and estimated total income is $231,000, determine the average rate of return giving effect to depreciation on the investment. Round your percentage answer to one decimal place (for example, a value of .1048 rounds to 10.5%).fill in the blank 1 %
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $130,900. Project 2 requires an initial investment of $97,200. Assume the company requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project 1 Years 1-7 Initial investment Net present value Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Net Cash Flows X Answer is complete but not entirely correct. Present Value of Annuity at 10% 26,460 X Project 1 $ 105,300 X 70,200…
! Required information [The following information applies to the questions displayed below.] Project Y requires a $331,500 investment for new machinery with a five-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1, EV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y $ 400,000 179,200 66,300 29,000 $ 125,500 3. Compute Project Y's accounting rate of return. Project Y Accounting Rate of Return Denominator: Numerator: / Accounting Rate of Return 0
Perit Industries has $155,000 to invest in one of the following two projects: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 155,000 $ 25,000 $ 8,600 6 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? X Answer is complete but not entirely correct. Project B $0 $ 155,000 $ 40,000 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 14%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. Note: Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount. 2. Compute the net present value of Project B. $(53,971) 70,527 X Project B $0…
The following data pertain to an investment proposal (Ignore income taxes.): Cost of the investment $ 35,000 Annual Income $ 12,000 Estimated salvage value $ 6,000 Life of the project 4 years Discount rate 10% The net present value of the proposed investment is closest to: Round to nearest dolla