Whispering Winds Company is considering two capital investment proposals. Estimates regarding each project are provided below:Project SoupProject NutsInitial investment$400000$600000Annual net income2800044000Net annual cash inflow106000130000Estimated useful life5 years6 yearsSalvage value0The company requires a 10% rate of return on all new investments.Present Value of an Annuityof 1Periods 9% 10% 11% 12%53.893.791 3.696 3.60564.486 4.355 4.231 4.111The annual rate of return for Project Soup is○ 7.0%.○ 53%.○ 14%.○ 26.5%.

Rate of Return Calculation for Whispering Winds Company ProjectsWhispering Winds Company is…

Answered: Whispering Winds Company is considering…

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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Harris Corporation has provided the following data concerning an investment project that it is considering: Initial investment Annual cash flow Salvage value at the end of the project Expected life of the project Discount rate $ 160,000 $ 54,000 $ 11,000 O $67,000 O $160,516 O $516 O $(5,776) 4 15 per year years % Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:
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Compute the payback statistic for Project A if the appropriate cost of capital is 9 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 0 1 2 3 4 5 Cash flow: −$2,100 $790 $810 $740 $520 $320 Payback: ? Years
OF CO Cum Oriole Company is considering two capital investment proposals. Estimates regarding each project are provided below: Initial investment Annual net income Net annual cash inflow Estimated useful life Salvage value Periods 5 Project Soup $400000 48000 124000 5 years 0 The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 10% 12% 9% 62%. 12.0%, 24% Ⓒ31,0% 11% 3.89 3.791 3.696 3.605 4.486 4.355 4.231 4.111 The annual rate of return for Project Soup is Project Nuts $600000 64000 155000 6 years 0
Acme Company is considering an investment in a project that requires an initial investment of $64,650, generates annual net cash inflows of $8,500, and has an economic life of 15 years and no salvage value. Use the present value of an annuity table to determine the internal rate of return of this investment. 8% 10% 12% 14%
Lanham Incorporated recently invested in a project with a 3-year life span. The net present value was $9,000 and annual cash inflows were $21,000 for year 1; $24,000 for year 2; and $27,000 for year 3. The initial investment for the project, assuming a 15% required rate of return, was Year Present Value of 1 at 15% PV of an Annuity of 1 at 15% 1 .870 .870 2 .756 1.626 3 .658 2.283
Beta Co. is considering two projects. Their required rate of return is 8%. Project Initial investment cost Annual cash flows Life of the project A B $110,000 $80,000 $55,838 $43,034 2 years 2 years a) Compute the present value factor and the IRR for the two projects. Please make sure your final answers for the present value factor are accurate to 3 decimal places and the ones for the IRR are accurate to the nearest whole percent. Project Present value factor IRR 0.500 13% 0.538 13% B
Tiberius Manufacturing is considering two alternative investment proposals with the following data: Proposal X Investment $10,800,000 Useful life. Estimated annual net cash inflows for 5 years 5 years $2,160,000 Residual value $60,000 Depreciation method Straight-line Required rate of return 14% Calculate the accounting rate of return for Proposal Y. (Round any intermediate calculations and your final answer to two decimal places.) OA. 13.90% OB. 11.56% OC. 17.83% OD. 7.58% Proposal Y $440,000 5 years $99,000 $35,000 Straight-line 13%
Vulcan Chemical is considering two capital investment proposals for plant-wide battery systems. Estimates regarding each project are provided below: Lithium Ion Nickle Cadmium Initial investment $200,000 $300,000 Annual net income 30,000 46,000 Net annual cash inflow 110,000 146,000 Estimated useful life 5 years 6 years Salvage value -0- -0- The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 Periods 9% 10% 11% 12% 5 3.890 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111 The cash payback period for Nickle Cadmium…
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2. Data for two alternatives are as follows: Alternative A Investment P 35,000 Annual Benefits 20,000 Annual Operations and Maintenance 6,450 Estimated Life, Years 4 Net Salvage Value 3500 Using an interest rate of 20%, which alternative should be considered? Alternative B P50,000 25,000 13,830 8 0
Staple Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Beans Project Rice Initial investment Annual net income Net annual cash flow Estimated useful life Salvage value Periods 5 6 9% The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 11% 12% 3.890 4.486 10% 3.791 $400,000 4.355 20,000 100,000 5 years -0- 3.696 4.231 $600,000 42,000 142,000 6 years -0- The net present value for Project Rice is 3.605 4.111

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