There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $34,580 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,000 $22,500 $4,500 $59,000 Beta Project 8,000 23,500 25,664 57,164 A. Calculate the internal rate of return on both projects. Use the IRR spreadsheet function to calculate internal rate of return. % Alpha Project Beta Project B. Make a recommendation on which one to accept.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $34,580 and is expected to generate the following cash
flows:
First Year
Second Year
Third Year
Total
Alpha Project
$32,000
$22,500
$4,500
$59,000
Beta Project
8,000
23,500
25,664
57,164
A. Calculate the internal rate of return on both projects. Use the IRR spreadsheet function to calculate internal rate of return.
%
Alpha Project
Beta Project
B. Make a recommendation on which one to accept.
Transcribed Image Text:There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $34,580 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,000 $22,500 $4,500 $59,000 Beta Project 8,000 23,500 25,664 57,164 A. Calculate the internal rate of return on both projects. Use the IRR spreadsheet function to calculate internal rate of return. % Alpha Project Beta Project B. Make a recommendation on which one to accept.
The management of Kawneer North America is considering investing in a new facility and the following cash flows are expected to result from the investment:
Year
Cash Outflow
Cash Inflow
1
$1,905,000
$100,000
550,000
195,000
355,000
4
485,000
510,000
605,000
595,000
300,000
245,000
245,000
10
A. What is the payback period of this uneven cash flow? Round your answer to 2 decimal places.
years
B. Does your answer change if year 10's cash inflow changes to $500,000?
if the cash inflow in year 10 changes to $500,000.
The answer for part A
Transcribed Image Text:The management of Kawneer North America is considering investing in a new facility and the following cash flows are expected to result from the investment: Year Cash Outflow Cash Inflow 1 $1,905,000 $100,000 550,000 195,000 355,000 4 485,000 510,000 605,000 595,000 300,000 245,000 245,000 10 A. What is the payback period of this uneven cash flow? Round your answer to 2 decimal places. years B. Does your answer change if year 10's cash inflow changes to $500,000? if the cash inflow in year 10 changes to $500,000. The answer for part A
Expert Solution
steps

Step by step

Solved in 2 steps with 3 images

Blurred answer
Knowledge Booster
Capital Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education