Survey of Accounting - With CengageNOW 1Term
8th Edition
ISBN: 9781337379823
Author: WARREN
Publisher: Cengage
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 15, Problem 15.4.1P
To determine
Concept Introduction:
NPV:
To Calculate:
The Net Present Value for each project
Expert Solution
Answer to Problem 15.4.1P
The Net Present value for each project for each project is as follows:
| Net Present Value | |
| Radio Station | $ 176,325 |
| TV Station | $ 148,809 |
Explanation of Solution
The Net Present value for each project is calculated as follows:
| Radio Station | Amount | PVF (10%) | PV |
| A | B | =A*B | |
| Annual Net | |||
| Year 1 | $ 560,000 | 0.90909 | $ 509,091 |
| Year 2 | $ 560,000 | 0.82645 | $ 462,810 |
| Year 3 | $ 560,000 | 0.75131 | $ 420,736 |
| Year 4 | $ 560,000 | 0.68301 | $ 382,488 |
| Present Value of | $ 1,775,125 | ||
| Investment (B) | $ 1,598,800 | 1.00000 | $ 1,598,800 |
| Net Present Value (A-B) | $ 176,325 | ||
| TV Station | Amount | PVF (20%) | PV |
| A | B | =A*B | |
| Annual Net Cash Flows | |||
| Year 1 | $ 1,120,000 | 0.90909 | $ 1,018,182 |
| Year 2 | $ 1,120,000 | 0.82645 | $ 925,620 |
| Year 3 | $ 1,120,000 | 0.75131 | $ 841,473 |
| Year 4 | $ 1,120,000 | 0.68301 | $ 764,975 |
| Present Value of Cash Inflow (A) | $ 3,550,249 | ||
| Investment (B) | $ 3,401,440 | 1.00000 | $ 3,401,440 |
| Net Present Value (A-B) | $ 148,809 |
To determine
Concept Introduction:
NPV:
Net present value (NPV) is the method to evaluate the project feasibility. This method calculates the present value of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:
To Calculate:
The Present Value Index for each project
Expert Solution
Answer to Problem 15.4.1P
The Present Value Index for each project is as follows:
| Present Value Index | |
| Radio Station | 1.11 |
| TV Station | 1.04 |
Explanation of Solution
The Present Value Index for each project is calculated as follows:
| Radio Station | Amount | PVF (10%) | PV |
| A | B | =A*B | |
| Annual Net Cash Flows | |||
| Year 1 | $ 560,000 | 0.90909 | $ 509,091 |
| Year 2 | $ 560,000 | 0.82645 | $ 462,810 |
| Year 3 | $ 560,000 | 0.75131 | $ 420,736 |
| Year 4 | $ 560,000 | 0.68301 | $ 382,488 |
| Present Value of Cash Inflow (A) | $ 1,775,125 | ||
| Investment (B) | $ 1,598,800 | 1.00000 | $ 1,598,800 |
| Present Value Index (A/B) | 1.11 | ||
| TV Station | Amount | PVF (20%) | PV |
| A | B | =A*B | |
| Annual Net Cash Flows | |||
| Year 1 | $ 1,120,000 | 0.90909 | $ 1,018,182 |
| Year 2 | $ 1,120,000 | 0.82645 | $ 925,620 |
| Year 3 | $ 1,120,000 | 0.75131 | $ 841,473 |
| Year 4 | $ 1,120,000 | 0.68301 | $ 764,975 |
| Present Value of Cash Inflow (A) | $ 3,550,249 | ||
| Investment (B) | $ 3,401,440 | 1.00000 | $ 3,401,440 |
| Present Value Index (A/B) | 1.04 |
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Can you solve this general accounting question with accurate accounting calculations?
Use the information provided to answer following question
Larry Ltd. is a registered VAT taxpayer. His business transactions for the months of January to March are included below. The VAT rate is 12.5%. All the amounts given are VAT inclusive.
Months
Sales
Purchases
Imports
January
$50,625
$30,375
$17,662.50
February
$63,337.50
$38,475
$25,087.50
March
$67,500
$52,312.50
$22,612.50
What is the Larry Ltd. VAT input tax for the 3 months period?
A.$7,262.50
B.$13,462.50
C.$20,725
D.$20,162.50
Accounting problem
Chapter 15 Solutions
Survey of Accounting - With CengageNOW 1Term
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
Knowledge Booster
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
- The tax authorities of Country A implemented several tax reforms with the main objective of achieving simplicity in the tax process. All of the following will help Country A in achieving their objective except: A.Reducing the number of lines on the tax form so that taxpayers don’t have to spend as much time filling out forms. B.Reducing the number of pages in the tax law so that it is easier to understand. C.Eliminating loopholes that some taxpayers use to avoid paying taxes. D.Using fewer forms and more user friendly instructions so that there is less hassle, less agony, and more free time.arrow_forwardCan you explain the correct methodology to solve this general accounting problem?arrow_forwardAccounts Receivable had a balance of $1,500 at the beginning of the month and $1,200 at the end of the month. Credit sales totaled $12,600 during the month. Calculate the cash collected from customers during the month, assuming that all sales were made on account.arrow_forward
- Can you solve this general accounting question with the appropriate accounting analysis techniques?arrow_forwardSweet Solutions reports net income of $375,000, sales of $6,250,000, and average assets of $850,000. What is the profit margin?arrow_forwardKimberly resides in Jamaica and applied the following rules to losses carried forward in her business. Which rule was incorrectly applied? A.The deduction allowed for prior year losses (PYL) is 50 percent of the net income for the respective year. B.Prior year losses which are not utilized in the current year cannot be applied against net income of subsequent years C.Net income is the total income less all exemptions and allowable deductions excluding the specific losses. D.There is no cap on the number of years for which losses may be carried forward.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT