This problem continues the Daniels Consulting situation from Problem P25-33 of Chapter 25. Daniels Consulting is considering

Question:

This problem continues the Daniels Consulting situation from Problem P25-33 of Chapter 25. Daniels Consulting is considering purchasing two different types of servers. Server A will generate net cash inflows of $26,000 per year and have a zero residual value. Server A’s estimated useful life is three years, and it costs $44,000. Server B will generate net cash inflows of $28,000 in year 1, $11,000 in year 2, and $5,000 in year 3. Server B has a $5,000 residual value and an estimated life of three years. Server B also costs $44,000. Daniels’s required rate of return is 14%.
Requirements
1. Calculate payback, accounting rate of return, , and for both server investments. Use Microsoft Excel to calculate NPV and IRR.
2. Assuming applies which server should Daniels invest in? Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Capital Rationing
Capital rationing is the act of placing restrictions on the amount of new investments or projects undertaken by a company. Capital rationing is the decision process used to select capital projects when there is a limited amount of funding available....