West Coast Industries Inc. wishes to evaluate three capital investment projects by using the net present value
Question:
West Coast Industries Inc. wishes to evaluate three capital investment projects by using the net present value method. Relevant data related to the projects are summarized as follows:
Instructions
1. Assuming that the desired rate of return is 20%, prepare a net present value analysis for each project. Use the present value of $1 table appearing in this chapter.
2. Determine a present value index for each project. Round to two decimal places.
3. Which project offers the largest amount of present value per dollar of investment? Explain.
EZ Notorious Short Expansion Facilities Network Amount to be invested $2,000,000 $1,250,000 $250,000 Annual net cash flows: Year 1 2,100,000 500,000 300,000 Year 2 1,800,000 600,000 300,000 Year 3 1,500,000 650,000 275,000
Step by Step Answer:
1 EZ Expansion Present Value Net Cash Present Value of Year of 1 at 20 Flow Net Cash Flow 1 0833 210...View the full answer
Related Video
NPV stands for \"Net Present Value,\" which is a financial concept used to determine the value of an investment or project. It measures the difference between the present value of cash inflows and the present value of cash outflows over a given period of time, using a specific discount rate. To calculate the NPV of an investment, you need to first estimate the cash inflows and outflows associated with the investment, and then discount them back to their present values using a discount rate. The discount rate represents the cost of capital or the expected rate of return required by investors. The formula for calculating NPV is: NPV = sum of (cash inflows / (1 + discount rate)^t) - sum of (cash outflows / (1 + discount rate)^t) Where: Cash inflows: the expected cash received from the investment Cash outflows: the expected cash paid out for the investment Discount rate: the required rate of return or the cost of capital t: the time period in which the cash flow occurs If the NPV is positive, it means that the investment is expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a good investment. If the NPV is negative, it means that the investment is not expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a bad investment.
Students also viewed these Business questions
-
Atlantic Coast Railroad Company wishes to evaluate three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows:...
-
Soares Industries Inc. wishes to evaluate three capital investment projects by using the net present value method. Relevant data related to the projects are summarized as follows: Instruction 1....
-
Donahue Industries Inc. wishes to evaluate three capital investment projects by using the net present value method. Relevant data related to the projects are summarized as follows: Instructions 1....
-
10. A light cord is wrapped around a wheel, R = 0.10 m and rotational inertia I about its axis and is attached to mass, m = 2 kg, see about its fixed axis and the object accelerates downward, (take g...
-
The square footage and monthly rental of 10 similar two-bedroom apartments yield the linear regression formula y = 1.165x + 615.23 where x represents the square footage of the apartment and y...
-
Differentiate between management fraud and employee fraud.
-
Design a heat exchanger network for MER with at most 18 heat exchangers (including utility heaters) and \(\Delta T_{\text {min }}=10^{\circ} \mathrm{C}\) for the following streams: When MER targets...
-
Minnows Corporation began operations in 2014. At the beginning of the year, the company purchased plant assets of $1,800,000, with an estimated useful life of 10 years and no residual value. During...
-
What areas of abnormal psychology have you been familiar with? What information most surprised you throughout the study of these fascinating and often misunderstood mental health issues? How was your...
-
Karsted Air Services is now in the final year of a project. The equipment originally cost $29 million, of which 75% has been depreciated. Karsted can sell the used equipment today for $8 million, and...
-
Mulkey Development Company has two competing projects: an office building and a condominium complex. Both projects have an initial investment of $1,000,000. The net cash flows estimated for the two...
-
Microsoft Corporation (MSFT) reported the following data (in millions) for a recent year: Sales ..............................................$110,360 Operating income...
-
A bank used SRI's consulting business intelligence values and lifestyles (VALS) research to profile customer segments that did not use any automated or electronic services. Based on your knowledge of...
-
QUESTION 4 Incredible Limited ("Incredible") is a listed company that trades in the information technology sector. Each of the three types of services mainly offered by the company is operated by a...
-
The capital account balances for Donald & Hanes LLP on January 1, 2011, were as follows: Donald, Capital 200,000 Hanes, Capital 100,000 Donald and Hanes shared net income and losses in the ratio of...
-
The short-run shutdown rule for a competitive firm is to shut down if: (A) P>AVC (B) P ATC (D) P AVC (B) P ATC (D) P < ATC. 10. Assume the table shown is for a hat factory, and shows the total...
-
At the beginning of the year, Zesty Corporation purchased 10,000 shares of Scrumptious Company common stock for $80 per share. Scrumptious Company, which has issued 40,000 shares of stock, earned net...
-
QUESTION 2 A local municipality wants to determine how many residents recycle their used smartphones. They randomly select 450 people, and find that 212 of them will recycle their smartphones. Create...
-
A city (labeled C for convenience) is trying to sell municipal bonds to support improvements in recreational facilities and highways. The face values (in thousands of dollars) of the bonds and the...
-
Flicker, Inc., a closely held corporation, acquired a passive activity this year. Gross income from operations of the activity was $160,000. Operating expenses, not including depreciation, were...
-
Identify the internal control weaknesses that exist at Buffalo Bobs Burgers, and discuss what can be done to prevent this theft. Themailroom employees send all remittances and remittance advices to...
-
The actual cash received from cash sales was $36,183, and the amount indicated by the cash register total was $36,197. a. What is the amount deposited in the bank for the days sales? b. What is the...
-
The actual cash received from cash sales was $11,279, and the amount indicated by the cash register total was $11,256. a. What is the amount deposited in the bank for the days sales? b. What is...
-
When the engine falls out of Rhonda's old car, it's time to shop for something newer. She is hoping to keep her monthly payment at $160, and a loan will be 5.4% simple interest for 48 months with a...
-
The premise of the experiment is: In a group of 10 people, present your findings with different mathematical models (eg, logistics, SI, SIS) or any other mathematical models. An initial person has a...
-
The rule of 72. 6. Show in Excel that if $20,000 is invested at 6% compounded annually, then it will double in about 12 years. (Note: 12=72/6) year F 1 23456780 9 Calculate the future value as the...
Study smarter with the SolutionInn App