Answered: There are two projects under…

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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There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $34,000 and is expected to generate the following cash flows:

	First Year	Second Year	Third Year	Total
Alpha Project	$32,000	$22,000	$5,000	$59,000
Beta Project	8,000	23,500	28,000	59,500

Present value and future values table: https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money

A. If the discount rate is 12%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places.

Alpha Project $_________

Beta Project $________

B. Which project should be recommended.

_____________

There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $34,000 and is expected to generate the
following cash flows:
First Year Second Year
Third Year
Total
Alpha Project
$32,000
$22,000
$5,000
$59,000
Beta Project
8,000
23,500
28,000
59,500
(Click here to see present value and future value tables)
A. If the discount rate is 12%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2
decimal places.
Alpha Project $
Beta Project $
B. Which project should be recommended.

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