Use the NPV method to determine whether Vargas Products should invest in the following projects: Project...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Use the NPV method to determine whether Vargas Products should invest in the following projects: Project A: Costs $280,000 and offers eight annual net cash inflows of $57,000. Vargas Products requires an annual return of 14% on investments of this nature. Project B: Costs $385,000 and offers 9 annual net cash inflows of $73,000. Vargas Products demands an annual return of 12% on investments of this nature. . Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A. Project A: Years 1-8 Present value of annuity 0 0 Project A Project B Investment Net present value of Project A Calculate the NPV of Project B. Project B: Years 1-9 Present value of annuity Investment Net present value of Project B Requirement 2. What is the maximum acceptable price to pay for each project? Maximum Acceptable Price Project A Project B Net Cash Inflow Net Cash Inflow Annuity PV Factor (i=14%, n=8) + Annuity PV Factor (i-12%, n=9) Present Value Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.) Select the formula, then enter the amounts to calculate the profitability index of each project. Present Value = = = COO Profitability Index Requirements 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. 2. What is the maximum acceptable price to pay for each project? 3. What is the profitability index of each project? Round to two decimal places. Print Done X Use the NPV method to determine whether Vargas Products should invest in the following projects: Project A: Costs $280,000 and offers eight annual net cash inflows of $57,000. Vargas Products requires an annual return of 14% on investments of this nature. Project B: Costs $385,000 and offers 9 annual net cash inflows of $73,000. Vargas Products demands an annual return of 12% on investments of this nature. . Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A. Project A: Years 1-8 Present value of annuity 0 0 Project A Project B Investment Net present value of Project A Calculate the NPV of Project B. Project B: Years 1-9 Present value of annuity Investment Net present value of Project B Requirement 2. What is the maximum acceptable price to pay for each project? Maximum Acceptable Price Project A Project B Net Cash Inflow Net Cash Inflow Annuity PV Factor (i=14%, n=8) + Annuity PV Factor (i-12%, n=9) Present Value Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.) Select the formula, then enter the amounts to calculate the profitability index of each project. Present Value = = = COO Profitability Index Requirements 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. 2. What is the maximum acceptable price to pay for each project? 3. What is the profitability index of each project? Round to two decimal places. Print Done X
Expert Answer:
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Use the NPV method to determine whether Vargas Products should invest in the following projects: Project A costs $280,000 and offers eight annual net cash inflows of $56,000. Vargas Products...
-
1) Explain the components of a financial market and its relevance to Jagdambay Exports. Be explicit and explain to the CFO how financial markets differ from markets for physical assets and why that...
-
What is the difference between an assignment and a delegation? 2. What factors indicate that a third party beneficiary is an intended beneficiary? 3. How are most contracts discharged? 4. What is a...
-
At December 31, 2014, the records of Seacrest Enterprises provided the following selected and incomplete data: Required 1. Complete the following: Shares issued ___________ Shares outstanding...
-
How does a biblical, covenantal perspective inform our understanding of servant leadership?
-
How do you feel about Facebook allowing third-party databases to be used for ad targeting on the firm's site? Does this concern you? Why or why not? What is the upside and potential downside for...
-
Evaluate the following integrals: a. \(\int_{0}^{\pi} \sin x \delta\left(x-\frac{\pi}{2} ight) d x\) b. \(\int_{-\infty}^{\infty} \delta\left(\frac{x-5}{3} e^{2 x} ight)\left(3 x^{2}-7 x+2 ight) d...
-
Up. Up and Away is a producer of kites and wind socks. Relevant data on a bottleneck operation in the shop for the upcoming fiscal year are given In the following table: The shop works two shifts per...
-
S-F 10-3 - Accounting for Equity Investments On January 1, 2024,Bark Company invest $10,000 in Roots, Inc. stock. Roots pays Bark a$400 dividend on August 1, 2024. Bark sells the Roots?? stock onA 2...
-
Adam Rust looked at his mechanic and sighed. The mechanic had just pronounced a death sentence on his road-weary car. The car had served him wellat a cost of $500 it had lasted through four years of...
-
Problem #2. Assume BMW (in Germany) exports cars to the US at a dollar price of $82,000, and the Euro trades at $1.20 If the euro appreciates against the dollar by 7.50%, to 1 = $1.29, and BMWs then...
-
You own a business and are considering an investment but there will be some environmental degradation. If you make the investment, it will pay 17165 annually at the end of each year of the next 5...
-
Solve and explain the equation analytically 6-3 logs (2x) = 0
-
For the gear train shown, the diameters of the three solid shafts are: dAB= 20 mm dcD = 25 mm dEF= 40 mm Knowing that for each shaft the allowable shearing stress is 58 MPa, determine the largest...
-
A following weighted graph contains 6 vertices and 10 edges 70 E 30 20 80 10 50 20 30 60 a) Does this graph contain an Euler circuit or/and Euler path? Why? (8 marks) b) What is the sequence of...
-
A marketing manager wants to know if the sales of the company will increase if he doubles the advertising dollars. In this case what would be the most suitable method of investigation? Explain.
-
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 8%. The...
-
A condenser (heat exchanger) brings 1 kg/s water flow at 10 kPa quality 95% to saturated liquid at 10 kPa, as shown in Fig. P4.91. The cooling is done by lake water at 20C that returns to the lake at...
-
Star Golf Products is considering whether to upgrade its equipment. Managers are considering two options. Equipment manufactured by Heatherwood Inc. costs $900,000 and will last six years and have no...
-
Refer to E8-44B. Tech Systems needs 78,000 optical switches next year (assume same relevant range). By outsourcing them, Tech Systems can use its idle facilities to manufacture another product that...
-
Rathke Industries manufactures and sells a single product. The controller has prepared the following income statement for the most recent year: The company produced 14,000 units and sold 8,500 units...
-
9. ROLE REVERSAL Write a multiple-choice question that highlights the difference between Chapters 7 and 11 of the Bankruptcy Code.
-
Write a security agreement in which your friend gives you a security interest in her $20,000 home entertainment system, in exchange for a loan of $12,000. Because the collateral is something that she...
-
Question: Builder wants to develop 1,000 acres in rural Montana, land that is home to the Kite Owl. The Environmental Protection Agency (EPA) rules that the Kite Owl is an endangered species, and...
Study smarter with the SolutionInn App