Calculating Payback. An investment project provides cash inflows of $700 per year for 8 years. a....

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Calculating Payback. An investment project provides cash inflows of $700 per year for 8 years. a. b. What is the project payback period if the initial cost is $3,400? What if it is $5,800? Calculating AAR. You are trying to determine whether to expand your business by building new manufacturing plant. The plant has an installation cost of $13,000,000, which will be depreciated straight-line to zero over its 4- year life. If the plant has the following projected net income over these 4 years, what is the project average accounting return (AAR)? Yr 1 $1,210,000; Yr 2: $1,720,000: Yr 3: $1,465,000; Yr 4: $1,313,000 Calculating IRR. ABC Limited evaluates all of its projects by applying the IRR rule. If the required return is 18%, should ABC accept the following project? Yr 0-$90,000; Yr 1: $35,000: Yr 2: $43,000; Yr 3: $40,000 Calculating NPV. For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 9%, should the firm accept this project? Calculating PI & NPV The Multigig Computer Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (1) Cash Flow (2) 0 -15 000 - 2 000 1 8 500 2 500 2 8 500 2 500 3 8 500 2 500 (a) If the required rate is 9% and Multigig Computer applies the profitability index decision rule, which project should the firm accept? (b) If the company applies NPV decision rule, which project should it take? Calculating Payback. An investment project provides cash inflows of $700 per year for 8 years. a. b. What is the project payback period if the initial cost is $3,400? What if it is $5,800? Calculating AAR. You are trying to determine whether to expand your business by building new manufacturing plant. The plant has an installation cost of $13,000,000, which will be depreciated straight-line to zero over its 4- year life. If the plant has the following projected net income over these 4 years, what is the project average accounting return (AAR)? Yr 1 $1,210,000; Yr 2: $1,720,000: Yr 3: $1,465,000; Yr 4: $1,313,000 Calculating IRR. ABC Limited evaluates all of its projects by applying the IRR rule. If the required return is 18%, should ABC accept the following project? Yr 0-$90,000; Yr 1: $35,000: Yr 2: $43,000; Yr 3: $40,000 Calculating NPV. For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 9%, should the firm accept this project? Calculating PI & NPV The Multigig Computer Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (1) Cash Flow (2) 0 -15 000 - 2 000 1 8 500 2 500 2 8 500 2 500 3 8 500 2 500 (a) If the required rate is 9% and Multigig Computer applies the profitability index decision rule, which project should the firm accept? (b) If the company applies NPV decision rule, which project should it take?