A contract is estimated to yield net annual returns of $31,000 for seven years. To secure the contract, an immediateoutlay of $150,000 is required. Interest is 11% compounded annually.Calculate the net present value (NPV) of the contract and determine whether the project should be accepted orrejected according to the net present value criterion.The net present value of the project is $(Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal placesas needed.)Should the project be accepted or rejected?The project should be

Net Present Value ( >NPV) :> Net present Value as the name suggests is the present value of…

The net present value of the project is (Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.) Should the project be accepted or rejected? The project should be

The net present value of the project is (Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.) Should the project be accepted or rejected? The project should be

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A contract is estimated to yield net annual returns of $31,000 for seven years. To secure the contract, an immediate
outlay of $150,000 is required. Interest is 11% compounded annually.
Calculate the net present value (NPV) of the contract and determine whether the project should be accepted or
rejected according to the net present value criterion.
The net present value of the project is $
(Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places
as needed.)
Should the project be accepted or rejected?
The project should be

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Compute the NPV for Project M if the appropriate cost of capital is 8 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.) Project M Time: 0 1 2 3 4 5 Cash flow: −$3,100 $710 $840 $880 $960 $460 Should the project be accepted or rejected?multiple choice rejected accepted
Your Question : Please introduction and correct and incorrect option explain!
Compute the Profitability Index (PI) for each project? Project A Project B Profitability Index (PI) 5- In light of your answers above, suppose that these two projects might be mutually exclusive or independent. According to these two assumptions, fill in the blanks in the table below with the suitable answer: Points Investment Criteria If A and B are mutually exclusive, then I would select If A and B are independent, then I would select PBP NPV IRR PI
Just answer last question (what is npv for the project if the required rate of return is 26%)
Basic NPV methods tell us that the value of a project today is NPV0. Time value of money issues also lead us to believe that if we choose not to do the project that it will be worth NPV1 one period from now, such that NPV0 > NPV1. Why then do we see some firms choosing to defer taking on a project?
The following information is available on two mutually exclusive projects. All numbers are in ‘000s. Project Year 0 Year 1 Year 2 Year 3 Year 4 A $700 $300 $300 $400 $400 B $700 $600 $300 $200 $100 a: If the minimum acceptable rate of return is 10%, which project should be selected using the Net Present Value (NPV) method? Which project should be selected if the Internal Rate of Return (IRR) method is used? b: At what cross‐over rate would the firm be indifferent between the two projects? What is the NPV for both projects at the crossover rate? c: How much should cash flow in year 3 for project B increase or decrease in order for NPV(B) to be equal to NPV(A)?
Just need b-1, d-1, and e-1 answered.
Compute the PI statistic for Project Q if the appropriate cost of capital is 12 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project Q Time: 0 1 2 3 4 Cash flow: −$12,200 $3,950 $4,780 $2,120 $2,750 MIRR: ?%Should the project be accepted or rejected?multiple choice rejected accepted
Project Analysis. Assume that you are evaluating the following three mutually exclusive projects: A. Complete the following analyses. (For the last two lines, Terminal Value, please write in the dollar amount of the terminal value.) B. Compare and explain the conflicting rankings of the NPVs and TRRs versus the IRRs. C. Using different discount rates, is it possible to get different rankings within the NPV calculation? Why or why not? D. If 10 percent is the required return, which project is preferred? E. Which is the fairer representation of these two projects, TRR or IRR? Why?
Using a required rate of return equal to 10 percent, compute the modified internal rate of return (MIRR) for a project that costs $80,000 and is expected to generate $33,000, $66,000, and -$10,950, respectively, during the next three years. Should the project be purchased? Do not round intermediate calculations. Round your answer to two decimal places. The project -Select- (should, should not) be purchase because the MIRR, that is %, is -Select- (greater than, lower than, equal to) the required rate of return.
Here are the four answer options provided for this question: (a) The project's PI is 21.48 percent and the project should be accepted. (b) The project's PI is 16.48 percent and the project should be accepted. (c) The project's PI is 8.48 percent and the project should be accepted. (d) The project's PI is 8.48 percent and the project should be rejected.
Subject: acounting