Timeline Manufacturing Co. is evaluating two projects. The company uses payback criteria of three years or less. Project A has a cost of $870,772, and project B's cost is $1,260,423. Cash flows from both projects are given in the following table. Year Project A Project B $86,212 $586,212 313,562 1 2. 413.277 3 427,594 231,199 4 285,552 What are their discounted payback periods? (Round answers to 2 decimal places, e.g. 15.25. If discounted payback period exceeds life of the project, enter 0.00 for the answer.) Discounted payback periods of project A Discounted payback periods of project B Which will be accepted with a discount rate of 8 percent? Timeline should choose Click if you would like neither project or this question: Open Show Work Project A Project B Both projects LINK TO TEXT

Timeline Manufacturing Co. is evaluating two projects. The company uses payback criteria of three years or less. Project A has a cost of $870,772, and project B's cost is $1,260,423. Cash flows from both projects are given in the following table. Year Project A Project B $86,212 $586,212 313,562 1 2. 413.277 3 427,594 231,199 4 285,552 What are their discounted payback periods? (Round answers to 2 decimal places, e.g. 15.25. If discounted payback period exceeds life of the project, enter 0.00 for the answer.) Discounted payback periods of project A Discounted payback periods of project B Which will be accepted with a discount rate of 8 percent? Timeline should choose Click if you would like neither project or this question: Open Show Work Project A Project B Both projects LINK TO TEXT

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Subject: accounting
Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required in equipment $ 36,500 Annual cash inflows $ 8,600 Salvage value of equipment $ 0 Life of the investment 15 years Required rate of return 10% The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. The internal rate of return of the investment is closest to: Multiple Choice 24 % 22 % 20% 26%
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Bridgeport Company has hired a consultant to propose a way to increase the company's revenues. The consultant has evaluated two mutually exclusive projects with the following information provided for each: Capital investment Annual cash flows Estimated useful life Project Turtle $1,125,000 184,000 10 years Project Snake $645,000 109,000 10 years Bridgeport Company uses a discount rate of 9% to evaluate both projects.
Management of Ivanhoe Measures, Inc., is evaluating two independent projects. The company uses a 13 percent discount rate for such projects. The costs and cash flows for the projects are shown in the following table. Year Project 1 Project 2 0 $8,812,840 -$10,781,200 1 3,363,400 2,021,330 2 1,788,290 3,848,800 3 1,367,600 3,173,090 4 1,088,900 4,104,310 5 1,111,380 4,130,780 6 1,723,940 7 1,319,290 k A What are their NPVs? (Enter negative amounts using negative sign, e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to O decimal places, e.g. 1,525.) Q Ac The NPV of Project 1 is $ and the NPV of Project 2 is $ Qu Mu
Project Y requires a $321,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Required: 1. Compute Project Y's annual net cash flows. Annual amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Net cash flow Project Y $ 380,000 170,240 80,250 27,000 $ 102,510 Income Cash Flow $ 380,000 170,240 80,250 27,000 102,510
Mulkey Development Company has two competing projects: an electric shovel and a processing mill. Both projects have an initial investment of $762,673. The net cash flows estimated for the two projects are as follows: Net Cash Flow Year Electric Shovel Processing Mill 1 $260,000 $338,000 2 231,000 302,000 3 231,000 278,000 4 185,000 286,000 5 140,000 6 117,000 7 101,000 8 101,000 The estimated residual value of the electric shovel at the end of Year 4 is $330,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322…
Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows: Present Value of Life of the Project A Investment Required Cash Inflows Project Internal Rate (years) of Return $ 160,000 $ 259,323 7 16% B $ 135,000 $ 232,000 12 18% $ 100,000 $ 190,035 7 D $ 164,000 $ 268,136 3 22% 17% The net present values should be computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, second, and so forth. Required: 1. Compute the profitability index for each project. 2. In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of return. Complete this question by entering your answers in the tabs below. Required 1 Required 2 In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of return. Net Present Value Profitability…
Nestor Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Year 1 Year 2 Year 3 Year 4 Year 5 Annual Net Cash Flows $ 40,000 $ 40,000 $ 35,000 $ 35,000 $ 30,000 Compute the payback period for this investment. (Round to two decimal places.) Multiple Choice O 2.85 years. 2.57 years.
National Textile Manufacturing Company is considering three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following cash inflows. 25 minutes Year AA BB CC 1 $ 7,000 $ 9,500 $11,000 2 9,000 9,500 10,000 3 15,000 9,500 9,000 Total $31,000 $28,500 $30,000 The equipment's salvage value is zero. The company uses straight-line depreciation; does not accept any project with a payback period over 2 years; and, has a minimum required rate of return of 12%. (a) Compute each project's payback…
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The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $1,104,000. The estimated net cash flows from each project are as follows: Net Cash Flow Year OfficeExpansion Server 1 $308,000 $407,000 2 308,000 407,000 3 308,000 407,000 4 308,000 407,000 5 308,000 6 308,000 The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $385,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5…

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