ABC Company's management is also considering 3 new projects consisting of the purchase of new equipment....
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ABC Company's management is also considering 3 new projects consisting of the purchase of new equipment. The company has limited resources and may not be able to complete/make all 3 purchases. Therefore, calculate the NPV for each, and place the projects in the order in which they should be completed using NPV as the reasoning. The information is as folle for the purchases below. Purchase Price Required Rate of Return Time Period Cash Flows-Year 1 Project I $80,000 6% 3 years $48,000 Cash Flows-Year 2 $36.000 Cash Flows-Year 3 $22.000 Cash Flows-Year 4 NA Cash Flows-Year 5 NA Project 2 $175,000 8% 5 years $85.000 $74,000 $38.000 $26,800 $19.000 Project 3 $22,700 12% 2 years $13,000 $13,000 NA NA NA 1. . Using Excel formulas, calculate the NPV for each of the 3 potential projects. It is possible that ABC Company may not be able to complete all 3 projects. Therefore, advise ABC Company as to the order in which they should pursue the projects (i.e., which project should ABC Company attempt to do first, second, and last). ● ABC Company's management is also considering 3 new projects consisting of the purchase of new equipment. The company has limited resources and may not be able to complete/make all 3 purchases. Therefore, calculate the NPV for each, and place the projects in the order in which they should be completed using NPV as the reasoning. The information is as folle for the purchases below. Purchase Price Required Rate of Return Time Period Cash Flows-Year 1 Project I $80,000 6% 3 years $48,000 Cash Flows-Year 2 $36.000 Cash Flows-Year 3 $22.000 Cash Flows-Year 4 NA Cash Flows-Year 5 NA Project 2 $175,000 8% 5 years $85.000 $74,000 $38.000 $26,800 $19.000 Project 3 $22,700 12% 2 years $13,000 $13,000 NA NA NA 1. . Using Excel formulas, calculate the NPV for each of the 3 potential projects. It is possible that ABC Company may not be able to complete all 3 projects. Therefore, advise ABC Company as to the order in which they should pursue the projects (i.e., which project should ABC Company attempt to do first, second, and last). ●
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The company should first invest in project B since it gives more returns to the inv... View the full answer
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ
Posted Date:
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