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Rozzis Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $15,000,000 for the year. Lenora Brown, staff analyst at Rozzis, is preparing an analysis of the three projects under consideration by Chuck Rozzis, the company's owner. b. Calculate the payback period for each of the three projects. Ignore income taxes. (Round your answers to two decimal place Project A years Project B years Project C years Data table 2 Projected cash outflow 3 Net initial investment 4 Projected cash inflows 5 Year 1 6 Year 2 7 Year 3 8 Year 4 9 Required rate of return. B Project A C Project B $ 6,600,000 $ 8,500,000 $9,000,000 D Project C $ 3,600,000 $5,500,000 $4,900,000 3,600,000 2,000,000 3,600,000 1.100.000 3,600,000 4,900,000 200,000 100,000 6% 6% Using the payback method, which project(s) should Razzis choose? Project A Requirement 2. Calculate the NPV for each project. Ignore income taxes. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for negative net present values.) The NPV of Project A is 6% Check answer Rozzis Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $15,000,000 for the year. Lenora Brown, staff analyst at Rozzis, is preparing an analysis of the three projects under consideration by Chuck Rozzis, the company's owner. b. Calculate the payback period for each of the three projects. Ignore income taxes. (Round your answers to two decimal place Project A years Project B years Project C years Data table 2 Projected cash outflow 3 Net initial investment 4 Projected cash inflows 5 Year 1 6 Year 2 7 Year 3 8 Year 4 9 Required rate of return. B Project A C Project B $ 6,600,000 $ 8,500,000 $9,000,000 D Project C $ 3,600,000 $5,500,000 $4,900,000 3,600,000 2,000,000 3,600,000 1.100.000 3,600,000 4,900,000 200,000 100,000 6% 6% Using the payback method, which project(s) should Razzis choose? Project A Requirement 2. Calculate the NPV for each project. Ignore income taxes. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for negative net present values.) The NPV of Project A is 6% Check answer
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Payback Period To calculate the payback period we divide the initial investment by the annual net cash inflow Project Initial Investment Annual Net Ca... View the full answer
Related Book For
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 978-0134475585
16th edition
Authors: Srikant M. Datar, Madhav V. Rajan
Posted Date:
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