Adelina Corporation used to accept investment opportunities that yielded discounted returns of 12%. With an increasing...
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Adelina Corporation used to accept investment opportunities that yielded discounted returns of 12%. With an increasing cost of capital, the company is now expecting an 18% discounted rate of return. Two competing alternatives are now waiting for your evaluation so you can advised the corporation. Pertinent data are shown below: Estimated economic life Net investment Estimated annual returns before depreciation and tax Alternative 1 6 years P1,575,000 600,000 a. Payback periods b. Discounted rates of return Alternative 2 6 years P1,890,000 900,000 Depreciation is to be deducted by the SYD formula. Assume that the entire net investment is subject to depreciation with no estimated scrap value for both. Use a tax rate of 30%. REQUIRED: 1. For both alternatives, determine: (Round answers for a, b, & d to 3 decimals) c. Net present values d. Profitability indices Adelina Corporation used to accept investment opportunities that yielded discounted returns of 12%. With an increasing cost of capital, the company is now expecting an 18% discounted rate of return. Two competing alternatives are now waiting for your evaluation so you can advised the corporation. Pertinent data are shown below: Estimated economic life Net investment Estimated annual returns before depreciation and tax Alternative 1 6 years P1,575,000 600,000 a. Payback periods b. Discounted rates of return Alternative 2 6 years P1,890,000 900,000 Depreciation is to be deducted by the SYD formula. Assume that the entire net investment is subject to depreciation with no estimated scrap value for both. Use a tax rate of 30%. REQUIRED: 1. For both alternatives, determine: (Round answers for a, b, & d to 3 decimals) c. Net present values d. Profitability indices
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Alternative 1 Income Year before dep Depreciation tax ii 1575000 600000 600000 i 0 1 2 3 Year 4 5 6 ... View the full answer
Related Book For
Accounting Principles
ISBN: 978-0470533475
9th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Posted Date:
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