Sunland Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $542,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $74,500. Project 8 Will cost $338,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $48,000. A discount rate of 7% 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, eg. 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 $ Profitability index-Project A

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Sunland Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $542,000, has an
expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $74,500. Project Bill
cost $338,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by
$48,000. A discount rate of 7% 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 O 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
Profitability index - Project A
Net present value - Project B
Profitability index-Project B
$
$
Which project should be accepted based on Net Present Value?
should be accepted.
Transcribed Image Text:Sunland Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $542,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $74,500. Project Bill cost $338,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $48,000. A discount rate of 7% 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 O 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 Profitability index - Project A Net present value - Project B Profitability index-Project B $ $ Which project should be accepted based on Net Present Value? should be accepted.
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