The U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows: Project A Investment -275,000 Year 1 $40,000 Year 2 56,000 Year 3 80,295 Year 4 90,400 Year 5 55,000 Year 6 50,000 Year 7 45,000 Year 8 32,000 Project B Investment -275,000 Year 1 $72,000 Year 2 50,000 Year 3 66,000 Year 4 72,000 Year 5 29,000 Year 6 35,000 Year 7 22,000 Year 8 36,000 Project C Investment -275,000 Year 1 $82,000 Year 2 75,000 Year 3 65,000 Year 4 55,000 Year 5 45,000 Year 6 35,000 Year 7 25,000 Year 8 15,000 Required: Compute the Net Present Value for each project using the following present value interest factors: (0.9091 0.8264 0.7513 0.6830 0.6209 0.5644 0.5131 0.4664) Select the best investment (mutually exclusive events) Answer
The U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows:
|
Project A Investment |
-275,000 |
|
|
Year 1 |
$40,000 |
|
|
Year 2 |
56,000 |
|
|
Year 3 |
80,295 |
|
|
Year 4 |
90,400 |
|
|
Year 5 |
55,000 |
|
|
Year 6 |
50,000 |
|
|
Year 7 |
45,000 |
|
|
Year 8 |
32,000 |
|
|
Project B Investment |
-275,000 |
|
|
Year 1 |
$72,000 |
|
|
Year 2 |
50,000 |
|
|
Year 3 |
66,000 |
|
|
Year 4 |
72,000 |
|
|
Year 5 |
29,000 |
|
|
Year 6 |
35,000 |
|
|
Year 7 |
22,000 |
|
|
Year 8 |
36,000 |
|
|
Project C Investment |
-275,000 |
|
|
Year 1 |
$82,000 |
|
|
Year 2 |
75,000 |
|
|
Year 3 |
65,000 |
|
|
Year 4 |
55,000 |
|
|
Year 5 |
45,000 |
|
|
Year 6 |
35,000 |
|
|
Year 7 |
25,000 |
|
|
Year 8 |
15,000 |
|
Required:
- Compute the
Net Present Value for each project using the following present value interest factors:
(0.9091 0.8264 0.7513 0.6830 0.6209 0.5644 0.5131 0.4664)
- Select the best investment (mutually exclusive events)
Answer
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