Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $228,000
Question:
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $228,000 and would yield the following annual net cash flows.
a. The company requires a 12% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted.
b. Using the answer from part a, is the internal rate of return higher or lower than 12% for
(i) Project C1 and
(ii) Project C2?
Net cash flows Project C1 Project C2 Year 1.... Year 2 .... Year 3 ..... $ 12,000 $ 96,000 ..... 108,000 96,000 168,000 96,000 Totals... $288,000 $288,000
Step by Step Answer:
Related Video
Internal rate of return is a method of calculating an investment’s rate of return. The term internal refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or financial risk.
Students also viewed these Business questions
-
Projects X and Y both require an initial investment of $100,000. Project X will generate an annual operating profit of $25,000 per year for six years. Project Y produces no profit in the first year,...
-
A new project has expected annual net cash flows of $400,000 with a standard deviation of $250,000. The distribution of annual net cash flows is approximately normal. a. What is the probability of...
-
A project has estimated annual net cash flows of $70,000 for four years and is estimated to cost $190,000. Assume a minimum acceptable rate of return of 10%. Using Exhibit 5, determine (a) The net...
-
Find the probability | (p)| 2d3 p of the particular momentum p for the ground-state hydrogen atom. (This is a nice exercise in three-dimensional Fourier transforms. To perform the angular...
-
It is proposed to build a 1000-MW electric power plant with steam as the working fluid. The condensers are to be cooled with river water (see Fig. P7.65). The maximum steam temperature is 550C, and...
-
Springfield mogul Montgomery Burns, age 80, wants to retire at age 100 so he can steal candy from babies full time. Once Mr. Burns retires, he wants to withdraw $1 billion at the beginning of each...
-
A state legislature is concerned about the increasing number of individuals driving under the influence of alcohol, and it decides that one way to address this public safety concern and discourage...
-
On January 1, 2011, Slidell Company received a 2-year, $500,000 loan, with interest payments occurring at the end of each year and the principal to be repaid on December 31, 2012. The interest rate...
-
1 What is HRM 2 What is Training and Developmnt 3 What is Recruitment 4 What is Selection 5 What is HRP 6 What is Job Analysis 7 What is a Career Planning and Development 8 What is Job-Description 9...
-
Complete Keith's tax return including all required schedules and forms using prince edward island as province, using the fillable forms package. Taxpayers Information Taxpayer #1 Name: Keith Dox...
-
Refer to the information in Exercise 26-2. The companys required rate of return is 12%. Data From Exercise 26-2: Quary Co. is considering an investment in machinery with the following information....
-
Pablo Company is considering buying a machine that will yield income of $1,950 and net cash flow of $14,950 per year for three years. The machine costs $45,000 and has an estimated $6,000 salvage...
-
Conservative economists believe the minimum wage law ________. a) helps all workers equally b) hurts all workers equally c) hurts teenagers more than other workers d) helps teenagers more than other...
-
A satellite, observed from a ground station, is found to have an altitude of 1000km and a velocity of 5.5km/sec. It is know that the satellite is at its furthest distance from the Earth. a. b. C. d....
-
Chs 18-25 A company allocates overhead using a standard overhead rate of $4.80 per direct labor hour and 2 direct labor hours per unit. For this period, the company planned production of 10,140 units...
-
1 2 3 4 5 6 7 8 An ARM assembly code consists of following instructions: MOV R5, #10 MOV R4,0x500 L1: LDR R1, [R4] ADD R5, R5, #4 CMP R5, #18 BLT L1 ADD R2, R3, #10 CMP R2, #30 Assume that LDR...
-
Write a C++ program that save a list of 10 students ("number" (integer). "name"(string) and "grade" (float of range from 0 to 100)) in a file. The first line in the file contains the information of...
-
As you learned last week, increasing the demand for Health Care in a market should increase its price. We expect that health professionals will respond to this higher price by increasing the amount...
-
Refer to Lemma 1.10 and Lemma 1.11. Find two more things preserved by isomorphism.
-
For the following exercises, find the inverse of the function and graph both the function and its inverse. f(x) = 4 x 2 , x 0
-
Review the chapters opener involving TOMS and its young entrepreneurial owner, Blake Mycoskie. Required 1. In a business such as TOMS, monitoring cash flow is always a priority. Even though TOMS now...
-
Key comparative information for Piaggio (www.piaggio.com), which manufactures two-, three- and four- wheel vehicles, and is Europes leading manufacturer of motorcycles and scooters, follows. Required...
-
Adria Lopez, owner of Success Systems, decides to prepare a statement of cash flows for her business. (Although the serial problem allowed for various ownership changes in earlier chapters, we will...
-
9. Let F be a closed subset in R, and 8(x) the distance from a to F, that is, : 8(x) = d(x, F) = inf{|xy| y F}. Clearly, 8(x+y) [Hint: Assume that x is a point of density of F.]
-
Discuss the key features of the following associated with the financial service industry: Financial products and services of the organisation Financial agency agreements Financial industry codes of...
-
You are building an apartment complex with 80 three-bedroom units near the downtown office district. The designers estimate that there will be on average 3.5 occupants in each apartment. A. Calculate...
Study smarter with the SolutionInn App