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S Rowan Company is considering two alternative investment projects. Each requires a $264,000 initial investment. Project A is expected to generate net cash flows of $74,000 per year over the next six years. Project B is expected to generate net cash flows of $64,000 per year over the next seven years. Management requires an 8% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. Compute each project's net present value. 2. Compute each project's profitability index. 3. If the company can choose only one project, which should it choose, based on profitability index? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute each project's net present value. Note: Do not round intermediate calculations. Round your present value factor to 4 decimals and your final answers to the nearest whole dollar. Project A Years 1-6 Net present value Project B Years 1-7 Net nresent value Net Cash Flows Net Cash Flows X Present Value of Annuity at 8% Present Value of Annuity at 8% = = = Present Value of Net Cash Flows $ Present Value of Net Cash Flows $ 0 < Prev 0 2 of 4 # Next >

S Rowan Company is considering two alternative investment projects. Each requires a $264,000 initial investment. Project A is expected to generate net cash flows of $74,000 per year over the next six years. Project B is expected to generate net cash flows of $64,000 per year over the next seven years. Management requires an 8% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. Compute each project's net present value. 2. Compute each project's profitability index. 3. If the company can choose only one project, which should it choose, based on profitability index? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute each project's net present value. Note: Do not round intermediate calculations. Round your present value factor to 4 decimals and your final answers to the nearest whole dollar. Project A Years 1-6 Net present value Project B Years 1-7 Net nresent value Net Cash Flows Net Cash Flows X Present Value of Annuity at 8% Present Value of Annuity at 8% = = = Present Value of Net Cash Flows $ Present Value of Net Cash Flows $ 0 < Prev 0 2 of 4 # Next >

FINANCIAL ACCOUNTING
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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< ces Rowan Company is considering two alternative investment projects. Each requires a $264,000 initial investment. Project A is expected to generate net cash flows of $74,000 per year over the next six years. Project B is expected to generate net cash flows of $64,000 per year over the next seven years. Management requires an 8% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. Compute each project's net present value. 2. Compute each project's profitability index. 3. If the company can choose only one project, which should it choose, based on profitability index? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute each project's net present value. Note: Do not round intermediate calculations. Round your present value factor to 4 decimals and your final answers to the nearest whole dollar. Project A Years 1-6 Net present value Project B Years 1-7 Net present value Net Cash Flows Net Cash Flows X X Present Value of Annuity at 8% Present Value of Annuity at 8% 11 Present Value of Net Cash Flows $ Present Value of Net Cash Flows 69 $ 0 < Prev 0 2 of 4 Next >
Transcribed Image Text:< ces Rowan Company is considering two alternative investment projects. Each requires a $264,000 initial investment. Project A is expected to generate net cash flows of $74,000 per year over the next six years. Project B is expected to generate net cash flows of $64,000 per year over the next seven years. Management requires an 8% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. Compute each project's net present value. 2. Compute each project's profitability index. 3. If the company can choose only one project, which should it choose, based on profitability index? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute each project's net present value. Note: Do not round intermediate calculations. Round your present value factor to 4 decimals and your final answers to the nearest whole dollar. Project A Years 1-6 Net present value Project B Years 1-7 Net present value Net Cash Flows Net Cash Flows X X Present Value of Annuity at 8% Present Value of Annuity at 8% 11 Present Value of Net Cash Flows $ Present Value of Net Cash Flows 69 $ 0 < Prev 0 2 of 4 Next >
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