Double K Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data
Question:
a. Determine the present value index for each proposal.
b. Which location does your analysissupport?
Blue Springs Lees Summit Total present value of net cash flow Less amount to be invested $540,750 $484800 52500 505,000 15750 S2U Net present value
Step by Step Answer:
a Present Value Index Total Present Value of Net Cash Flow Amount t...View the full answer
Financial and Managerial Accounting
ISBN: 978-1285078571
12th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
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 Managerial Accounting questions
-
Dippin doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the computation are as follows: (a) Determine the present value index each...
-
Tasty Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the computation are as follows: a. Determine the present value index for each...
-
Drive By Doughnuts has computed the net present value for capital expenditure locations A and B, using the net present value method. Relevant data related to the computation are as follows: Determine...
-
In which control account would you expect to find a provision for doubtful debts?
-
A mass of 10 kg of saturated liquid-vapor mixture of R-12 is contained in a piston-cylinder device at 0oC. Initially half of the mixture is in the liquid phase. Heat is now transferred, and the...
-
Toronto drivers have been going to small towns in Ontario (Canada) to take the drivers road test, rather than taking the test in Toronto, because the pass rate in the small towns is 90%, which is...
-
Describe the activities of each department that participates in the execution of cash receipts transactions.
-
ANALYSIS OF PROFITABILITY Based on the financial statement data in Exercise 24-1A, compute the following profitability measures for 20-2 (round all calculations to two decimal places): (a) profit...
-
How does the level of employee engagement correlate with their organizational commitment, and what practices are most effective in promoting both?
-
1. Anton and Beatrice are brother and sister in their twenties, living in the family home which, together with its contents, is owned by their father, Robert. Since Anton and Beatrice can remember,...
-
Briggs Excavation Company is planning an investment of $ 132,000 for a bulldozer. The bulldozer is expected to operate for 1,500 hours per year for five years. Customers will be charged $ 110 per...
-
Diamond & Turf Inc. is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 150 baseballs per hour to sewing 290 per hour. The contribution...
-
The crest of a standard, USBR 90V-notch weir is 3 feet above the bottom of an irrigation channel. It is used to measure 25.6 cfs of flow to a customer. At this flow rate, the depth of water upstream...
-
Explain the number (intrinsic value - current price) based on the FCF, WACC, and 8.4% Growth Rate & why this number is not the same to the current price? Based on your analysis, is Tesla...
-
Rowe Inc. has been in operations for approximately 5 years. It is a private company, so the company prepares financial statements once a year. The company has no plans in the near future to go...
-
Using the expected cash flows given below, what is the estimated value of the property, Vo, if purchased using "all cash" and if estimated using the discounted cash flow (DCF) approach? Assume the...
-
Deluxe River Cruises operates a fleet of river vessels. The fleet has two types of vessels: a type A. x, vessel has 60 deluxe cabins and 160 standard cabins, whereas a type B vessel, y, has 50 deluxe...
-
Complete a GE-Hitachi Analysis of the fan assembly shown below. There are 3 operations: Mount Fan Blades to Hub, Mount Set Screw in Hub, Install fan assembly on Motor. Please fill in the GE-Hitachi...
-
Find the power factor for the circuit shown in Fig. 10-17. 2 3 j4 w 10
-
Discuss the information available from the following techniques in the analysis of inorganic pigments used in antique oil paintings: (i) Powder X-ray diffraction, (ii) Infrared and Raman...
-
Indicate whether each of the following statements is true or false by writing T or F in the answer c olumn. Some state statutes provide that property acquired before a marriage is the community...
-
Abbe Co. is a small merchandising company with a manual accounting system. An investigation revealed that in spite of a sufficient bank balance, a significant amount of available cash discounts had...
-
Abbe Co. is a small merchandising company with a manual accounting system. An investigation revealed that in spite of a sufficient bank balance, a significant amount of available cash discounts had...
-
Abbe Co. is a small merchandising company with a manual accounting system. An investigation revealed that in spite of a sufficient bank balance, a significant amount of available cash discounts had...
-
Discuss the automotive industry in Munich Germany to include: a) Current size of the industry in terms of revenues, b) Detailed information on BMW in Munich, Baravia, c) BMWs main competitors in...
-
Using the Internet, identify a known sexual offender who has been arrested, convicted, and sentenced. Using the available information, describe each of the following: (a) The type of behavior that...
-
Of our secondary and tertiary education system, are we doing a great job preparing students for the professional world post-college, or should that be placed upon the employer? If we need have a...
Study smarter with the SolutionInn App