# Question: The management of Heckel Communications Inc is considering two capital

The management of Heckel Communications Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows:

The radio station requires an investment of $1,598,800, while the TV station requires an investment of $3,401,440. No residual value is expected from either project.

Instruction

1. Compute the following for each project:

a. The net present value. Use a rate of 10% and the present value of an annuity of $1 table appearing in this chapter.

b. A present value index. Round to two decimal places.

2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 table appearing in this chapter.

3. What advantage does the internal rate of return method have over the net present value method in comparingprojects?

The radio station requires an investment of $1,598,800, while the TV station requires an investment of $3,401,440. No residual value is expected from either project.

Instruction

1. Compute the following for each project:

a. The net present value. Use a rate of 10% and the present value of an annuity of $1 table appearing in this chapter.

b. A present value index. Round to two decimal places.

2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 table appearing in this chapter.

3. What advantage does the internal rate of return method have over the net present value method in comparingprojects?

## Relevant Questions

The investment committee of Iron Skillet Restaurants Inc. is evaluating two restaurant sites. The sites have different useful lives, but each requires an investment of $1,000,000. The estimated net cash flows from each site ...When are short-term notes payable issued?The treasury stock in Question 14 is resold for $2,400,000. a. What is the effect on the corporationâ€™s revenue of the period?b. What is the effect on stockholdersâ€™ equity?An employee earns $35 per hour and 1.5 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 52 hours during the week, and that the gross pay prior to the current week totaled $62,000. ...On August 7, Easy Up Corporation, a wholesaler of hydraulic lifts, acquired land in exchange for 20,000 shares of $10 par common stock with a current market price of $14.Illustrate the effect on the accounts and financial ...Post your question