Survey of Accounting (Accounting I)
8th Edition
ISBN: 9781305961883
Author: Carl Warren
Publisher: Cengage Learning
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Chapter 15, Problem 15.2.2C
To determine
Concept Introduction:
NPV:
To Calculate:
The Net present value of Master degree
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A Masters of Accountancy degree at Central University costs $97,688 assume additional cost $57,312 for the fifth year of education beyond the bachelor’s degree. Assume that all tuition is paid at the beginning of the year. A student considering the investment must evaluate the present value of cash flows from possessing a graduate degree versus holding only the undergraduate degree. Assume that the average student with an undergraduate degree is expected to earn an annual salary of $50,000 per year (assumed to be paid at the end of the year) for 10 years. Assume, also, that the average student with a graduate Masters of Accountancy degree is expected to earn an annual salary of $66,000 per year for nine years after graduation. Use 10% as your rate of return.
1. Determine the net present value of cash flows from an undergraduate degree
2. Determine the net present value of cash flows from the Masters of Accountancy degree
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Use the NPV method to determine whether Kyler Products should invest in the following projects:
Project A: Costs $280,000 and offers seven annual net cash inflows of $52,000. Kyler Products requires an annual return of 12% on investments of this nature.
Project B: Costs $385,000 and offers 9 annual net cash inflows of $75,000. Kyler Products demands an annual return of 10% on investments of this nature.
(Click the icon to view Present Value of $1 table.)
(Click the icon to view Present Value of Ordinary Annuity of $1 table.)
Read the requirements.
Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use
parentheses or a minus sign for a negative net present value.)
Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A.
Project A:
Years
1-7
0
Present value of annuity
Investment
Net present value of Project A
Calculate…
Use the NPV method to determine whether Kyler Products should invest in the following projects:
Project A: Costs $280,000 and offers seven annual net cash inflows of $52,000. Kyler Products requires an annual return of 12% on investments of this nature.
Project B: Costs $385,000 and offers 9 annual net cash inflows of $75,000. Kyler Products demands an annual return of 10% on investments of this nature.
(Click the icon to view Present Value of $1 table.)
(Click the icon to view Present Value of Ordinary Annuity of $1 table.)
Read the requirements.
Project B:
Years
1-9
0
Project A
Project B
Present value of annuity
Investment
Net present value of Project B
Requirement 2. What is the maximum acceptable price to pay for each project?
Maximum
Project A
Project B
Net Cash
Inflow
Acceptable Price
Annuity PV Factor
(i=10%, n=9)
Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.)
Select the formula, then enter the amounts to calculate the…
Chapter 15 Solutions
Survey of Accounting (Accounting I)
Ch. 15 - Prob. 1SEQCh. 15 - Management is considering a $100,000 investmentin...Ch. 15 - The expected period of time that will elapse...Ch. 15 - A project that will cost $120,000 is estimated to...Ch. 15 - Prob. 5SEQCh. 15 - What are the principal objections to the use 01the...Ch. 15 - Discuss the principal limitations of the cash...Ch. 15 - Prob. 3CDQCh. 15 - Prob. 4CDQCh. 15 - Prob. 5CDQ
Ch. 15 - Prob. 6CDQCh. 15 - Prob. 7CDQCh. 15 - Prob. 8CDQCh. 15 - Prob. 9CDQCh. 15 - Prob. 10CDQCh. 15 - Prob. 11CDQCh. 15 - Prob. 12CDQCh. 15 - Prob. 13CDQCh. 15 - Prob. 14CDQCh. 15 - Prob. 15CDQCh. 15 - Monsanto Company, a large chemical and...Ch. 15 - Average rate of return The following data are...Ch. 15 - Prob. 15.2ECh. 15 - Average rate of return—new product Arrowhead Inc....Ch. 15 - Calculate cash flows Daffodil Inc. is planning to...Ch. 15 - Prob. 15.5ECh. 15 - Cash payback method Bliss Beauty Products ¡s...Ch. 15 - Prob. 15.7ECh. 15 - Prob. 15.8ECh. 15 - Net present value method—annuity Model 99 Hotels...Ch. 15 - Prob. 15.10ECh. 15 - Prob. 15.11ECh. 15 - Prob. 15.12ECh. 15 - Prob. 15.13ECh. 15 - Average rate of return, cash payback period, net...Ch. 15 - Prob. 15.15ECh. 15 - Internal rate of return method The internal rate...Ch. 15 - Prob. 15.17ECh. 15 - Internal rate of return method—two projects Strahn...Ch. 15 - Prob. 15.19ECh. 15 - Prob. 15.20ECh. 15 - Prob. 15.21ECh. 15 - Prob. 15.22ECh. 15 - Average rate of return method, net present value...Ch. 15 - Average rate of return method, net present value...Ch. 15 - Prob. 15.2.1PCh. 15 - Cash payback period, net present value method, and...Ch. 15 - Prob. 15.3.1PCh. 15 - Prob. 15.3.2PCh. 15 - Prob. 15.3.3PCh. 15 - Prob. 15.4.1PCh. 15 - Prob. 15.4.2PCh. 15 - Prob. 15.4.3PCh. 15 - Prob. 15.5.1PCh. 15 - Prob. 15.5.2PCh. 15 - Prob. 15.5.3PCh. 15 - Prob. 15.6.1PCh. 15 - Prob. 15.6.2PCh. 15 - Prob. 15.6.3PCh. 15 - Prob. 15.6.4PCh. 15 - Capital rationing decision involving four...Ch. 15 - Prob. 15.6.6PCh. 15 - Prob. 15.6.7PCh. 15 - Prob. 15.6.8PCh. 15 - Prob. 15.1.1MBACh. 15 - Prob. 15.1.2MBACh. 15 - Financial leverage MicrosoCortrepotied (MSFT)...Ch. 15 - Prob. 15.1.4MBACh. 15 - Prob. 15.2.1MBACh. 15 - Prob. 15.2.2MBACh. 15 - Prob. 15.2.3MBACh. 15 - Prob. 15.3.1MBACh. 15 - Prob. 15.3.2MBACh. 15 - Prob. 15.3.3MBACh. 15 - Prob. 15.4MBACh. 15 - Prob. 15.5.1MBACh. 15 - Financial leverage Costco Wholesale Corporation...Ch. 15 - Prob. 15.5.3MBACh. 15 - Prob. 15.5.4MBACh. 15 - Ethics and professional conduct in business Erin...Ch. 15 - Prob. 15.2.1CCh. 15 - Prob. 15.2.2CCh. 15 - Prob. 15.2.3CCh. 15 - Prob. 15.3.1CCh. 15 - Prob. 15.3.2CCh. 15 - Qualitative issues in investment analysis The...Ch. 15 - Prob. 15.5.1CCh. 15 - Prob. 15.5.2CCh. 15 - Prob. 15.6C
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