Project 1 requires an original investment of $38,300. The project will yield cash flows of $8,000...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Project 1 requires an original investment of $38,300. The project will yield cash flows of $8,000 per year for 5 years. Project 2 has a computed net present value of $9,000 over a three-year life. Project 1 could be sold at the end of three years for a price of $38,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the net present value of Project 1 over a three-year life with residual value, assuming a minimum rate of return of 10%. If required, round to the nearest dollar. b. Which project provides the greatest net present value? Project 1 requires an original investment of $38,300. The project will yield cash flows of $8,000 per year for 5 years. Project 2 has a computed net present value of $9,000 over a three-year life. Project 1 could be sold at the end of three years for a price of $38,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the net present value of Project 1 over a three-year life with residual value, assuming a minimum rate of return of 10%. If required, round to the nearest dollar. b. Which project provides the greatest net present value?
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
Broadmore Corporation acquired 75 percent of Stem Corporations common stock on January 1, 20X8, for $435,000. At that date, Stem reported common stock outstanding of $300,000 and retained earnings of...
-
Incurring long-term debt with an arrangement whereby lenders receive an option to buy common stock during all or a portion of the time the debt is outstanding is a frequently used corporate financing...
-
A journal article reported that a null hypothesis of = 100 was rejected because the P-value was less than 0.01. The sample size was given as 62, and the sample mean was given as 103.6. Find the...
-
Presented below are summary financial data from the The Coca-Cola Company 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following liquidity and solvency ratios: cash...
-
The following information is available for Quigley Company at December 31, 2014, regarding its investments. The company did not have any investments prior to 2014. Instructions (a) Prepare the...
-
in 2 0 0 7 , how could corus cut costs? was it related to technology? How could corus cut costs while adopting new technology?
-
Verify the divergence theorem for the vector field over the region bounded by the planes z = 0, z = 2, x = 0, x = 1, y = 0, y = 4. F = z+z+yk
-
Is it fair to try a defendant in absentia? What are some possible alternatives?
-
Why should secondary data always be assessed before primary data?
-
Why is cross-examination of prosecution witnesses such an important right?
-
What is one way to increase the value of syndicated data?
-
Should the right to a trial by jury be limited to only serious offenses, or should it be guaranteed regardless of the level of offense?
-
A certain parallel circuit consists of only 1/2 W resistors each having the same resistance. The total resistance is 1k, and the total current is 50mA. If each resistor is operating atone-half its...
-
You work as an operations consultant for a textile company. Your client has a well-established distribution system in the US market. The company has hundreds of stores and four distribution centers....
-
You may have thought of trying the method of Lagrange multipliers to find optimal solutions, since, after the introduction of slack variables into the standard maximum problem, the problem has the...
-
Consider the problem: (a) Sketch the feasible region, find the coordinates of the corner points, and find the optimal value. (b) Repeat (a) if the right-hand side constants are changed to \(6+h_{1}\)...
-
Show that if there is a non-basic variable all of whose coefficients are non-negative at some stage of execution, then the problem is unbounded, as the message described above claims.
Study smarter with the SolutionInn App