Assets Liabilities and Equity Cash $120,000 Long-term debt $691,200 Accounts Receivable $240,000 Common Equity $1,728,000 Inventories...

Transcribed Image Text:

Assets Liabilities and Equity Cash $120,000 Long-term debt $691,200 Accounts Receivable $240,000 Common Equity $1,728,000 Inventories $360,000 Preferred Stock $460,800 Plant and $2,160,000 Equipment, net Total Liabilities and Total Assets $2,880,000 $2,880,000 Equity b) LJS Co. is deciding between two mutually exclusive projects. The two projects have the following cash flows: Year 0 1 2 3 4 Project A Project B Cash Flow & (50,000) Cash Flow $ (30,000) 10,000 6,000 15,000 12,000 40,000 18,000 20,000 12,000 Using the weighted average cost of capital (WACC) calculated in (a), calculate the net present value (NPV) of the project with the highest internal rate of return (IRR). Assets Liabilities and Equity Cash $120,000 Long-term debt $691,200 Accounts Receivable $240,000 Common Equity $1,728,000 Inventories $360,000 Preferred Stock $460,800 Plant and $2,160,000 Equipment, net Total Liabilities and Total Assets $2,880,000 $2,880,000 Equity b) LJS Co. is deciding between two mutually exclusive projects. The two projects have the following cash flows: Year 0 1 2 3 4 Project A Project B Cash Flow & (50,000) Cash Flow $ (30,000) 10,000 6,000 15,000 12,000 40,000 18,000 20,000 12,000 Using the weighted average cost of capital (WACC) calculated in (a), calculate the net present value (NPV) of the project with the highest internal rate of return (IRR).