Sheffield had an incredible year in its landscaping business. With extra cash available, the company is considering one of two possible investments: 1. 2. An additional trailer, to allow for more flexibility in planning and working different jobs simultaneously. A third truck that would allow for additional jobs, but this option would also require an additional worker and the costs associated with hiring, payroll taxes, etc. Financial information for each option is as follows. Initial investment Net annual cash inflow Years of useful life Salvage value Tax rate Required rate of return (a) Option 1 $29,800 $10,400 IRR 4 Option 1 $- 20% 9% Option 2 $41,000 % $10,400 5 $2,100 Calculate the IRR for both investment options. (Round answers to 2 decimal places, eg. 15.25%) 20% 9% Option 2 % SUPPORT

Sheffield had an incredible year in its landscaping business. With extra cash available, the company is considering one of two possible investments: 1. 2. An additional trailer, to allow for more flexibility in planning and working different jobs simultaneously. A third truck that would allow for additional jobs, but this option would also require an additional worker and the costs associated with hiring, payroll taxes, etc. Financial information for each option is as follows. Initial investment Net annual cash inflow Years of useful life Salvage value Tax rate Required rate of return (a) Option 1 $29,800 $10,400 IRR 4 Option 1 $- 20% 9% Option 2 $41,000 % $10,400 5 $2,100 Calculate the IRR for both investment options. (Round answers to 2 decimal places, eg. 15.25%) 20% 9% Option 2 % SUPPORT

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

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After analysing the financial data of Q-Constructions, you notice that they are trending in the right direction. A new 12-month construction proposal has come to the company worth $1,000,000 and an important question is whether it will be financially viable. They want you to analyse the proposal, in particular, the recommended cash flow schedule and to understand the key financial points during the construction project. The following cash flow schedule is summarised below. To ensure that all upfront and on-going outlay costs are covered in advance, Q-Constructions incur an initial start-up cost of $200,000. The proposal states that they will receive a deposit from the client of 10% of the total project price at the beginning. They then receive four equal instalment payments of 20% of the total project price associated to project milestones from the client at the end of the 2nd, 6th, 8th and 10th month. Finally, they receive the last 10% project milestone on lock-up which occurs at the…
After analysing the financial data of Q-Constructions, you notice that they are trending in the right direction. A new 12-month construction proposal has come to the company worth $1,000,000 and an important question is whether it will be financially viable. They want you to analyse the proposal, in particular, the recommended cash flow schedule and to understand the key financial points during the construction project. The following cash flow schedule is summarised below. To ensure that all upfront and on-going outlay costs are covered in advance, Q-Constructions incur an initial start-up cost of $200,000. The proposal states that they will receive a deposit from the client of 10% of the total project price at the beginning. They then receive four equal instalment payments of 20% of the total project price associated to project milestones from the client at the end of the 2nd, 6th, 8th and 10th month. Finally, they receive the last 10% project milestone on lock-up which occurs at the…
After analysing the financial data of Q-Constructions, you notice that they are trending in the right direction. A new 12-month construction proposal has come to the company worth $1,000,000 and an important question is whether it will be financially viable. They want you to analyse the proposal, in particular, the recommended cash flow schedule and to understand the key financial points during the construction project. The following cash flow schedule is summarised below. To ensure that all upfront and on-going outlay costs are covered in advance, Q-Constructions incur an initial start-up cost of $200,000. The proposal states that they will receive a deposit from the client of 10% of the total project price at the beginning. They then receive four equal instalment payments of 20% of the total project price associated to project milestones from the client at the end of the 2nd, 6th, 8th and 10th month. Finally, they receive the last 10% project milestone on lock-up which occurs at the…