The following table contains information about four projects in which Reynolds Corporation has the opportunity to invest. This information is based on estimates that different managers have prepared about their potential project. (Click the icon to view the projects information.) Requirements 1. Rank the four projects in order of preference by using the a. net present value. d. payback period. b. project profitability index. e. accounting rate of return. c. internal rate of return. 2. Which method(s) do you think is best for evaluating capital investment projects in general? Why? Data table Requirement 1. Rank the projects in order of preference. (a) (b) Net Present Profitability Value Index (c) Internal Rate of Return (d) Payback Period (e) Net Internal Payback Accounting Accounting of Retur 5 Investment Present Life of Rate of Profitability Period in Project Required Value Project Return Project A $205,000 $ 61,770 Rate of Index Years Return 24% 1.30 2.77 19% 1st preferred Project B $ 420,000 $ 19,032 6 22% 1.05 3.18 14% 2nd preferred 3rd preferred Project C $ 1,010,000 $214,075 Project D $ 1,540,000 $ 2,796 3 19% 1.21 2.13 10% 4 12% 1.00 3.03 25% 4th preferred Requirement 2. Select the method that corresponds to the appropriate explanation. This method indicates profitability by comparing t investment (already stated at its present value). This method is superior because it in This method helps to compare the NPV across alternative investments of varying sizes. Print Done This method also indicates profitability and incorporates the time value of money. This method will show us the actual rate of return being earned on the investment by equating the present value of the net cash inflows to the investment's cost. In other words, it is the interest rate which brings the investment's NPV
The following table contains information about four projects in which Reynolds Corporation has the opportunity to invest. This information is based on estimates that different managers have prepared about their potential project. (Click the icon to view the projects information.) Requirements 1. Rank the four projects in order of preference by using the a. net present value. d. payback period. b. project profitability index. e. accounting rate of return. c. internal rate of return. 2. Which method(s) do you think is best for evaluating capital investment projects in general? Why? Data table Requirement 1. Rank the projects in order of preference. (a) (b) Net Present Profitability Value Index (c) Internal Rate of Return (d) Payback Period (e) Net Internal Payback Accounting Accounting of Retur 5 Investment Present Life of Rate of Profitability Period in Project Required Value Project Return Project A $205,000 $ 61,770 Rate of Index Years Return 24% 1.30 2.77 19% 1st preferred Project B $ 420,000 $ 19,032 6 22% 1.05 3.18 14% 2nd preferred 3rd preferred Project C $ 1,010,000 $214,075 Project D $ 1,540,000 $ 2,796 3 19% 1.21 2.13 10% 4 12% 1.00 3.03 25% 4th preferred Requirement 2. Select the method that corresponds to the appropriate explanation. This method indicates profitability by comparing t investment (already stated at its present value). This method is superior because it in This method helps to compare the NPV across alternative investments of varying sizes. Print Done This method also indicates profitability and incorporates the time value of money. This method will show us the actual rate of return being earned on the investment by equating the present value of the net cash inflows to the investment's cost. In other words, it is the interest rate which brings the investment's NPV
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:The following table contains information about four projects in which Reynolds Corporation has the opportunity to invest. This information is based on estimates that different
managers have prepared about their potential project.
(Click the icon to view the projects information.)
Requirements
1. Rank the four projects in order of preference by using the
a. net present value.
d. payback period.
b. project profitability index.
e. accounting rate of return.
c. internal rate of return.
2. Which method(s) do you think is best for evaluating capital investment projects in general? Why?
Data table
Requirement 1. Rank the projects in order of preference.
(a)
(b)
Net Present Profitability
Value
Index
(c)
Internal Rate
of Return
(d)
Payback
Period
(e)
Net
Internal
Payback Accounting
Accounting
of Retur
5
Investment Present Life of Rate of Profitability Period in
Project Required Value Project Return
Project A $205,000 $ 61,770
Rate of
Index
Years
Return
24%
1.30
2.77
19%
1st preferred
Project B $ 420,000 $ 19,032
6
22%
1.05
3.18
14%
2nd preferred
3rd preferred
Project C $ 1,010,000 $214,075
Project D $ 1,540,000 $ 2,796
3
19%
1.21
2.13
10%
4
12%
1.00
3.03
25%
4th preferred
Requirement 2. Select the method that corresponds to the appropriate explanation.
This method indicates profitability by comparing t
investment (already stated at its present value). This method is superior because it in
This method helps to compare the NPV across alternative investments of varying sizes.
Print
Done
This method also indicates profitability and incorporates the time value of money. This method will show us the actual rate of return being
earned on the investment by equating the present value of the net cash inflows to the investment's cost. In other words, it is the interest rate which brings the investment's NPV
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