Question: Exercise 24-14 Computation and interpretation of net present value and internal rate of return LO P3, P4 Phoenix Company can invest in each of three
Exercise 24-14 Computation and interpretation of net present value and internal rate of return LO P3, P4
| Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $330,000 and would yield the following annual cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign.) |
| C1 | C2 | C3 | ||||||||||
| Year 1 | $ | 46,000 | $ | 130,000 | $ | 214,000 | ||||||
| Year 2 | 142,000 | 130,000 | 94,000 | |||||||||
| Year 3 | 202,000 | 130,000 | 82,000 | |||||||||
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| Totals | $ | 390,000 | $ | 390,000 | $ | 390,000 | ||||||
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| (1) | Assuming that the company requires a 8% return from its investments, use net present value to determine which projects, if any, should be acquired. (Round your answers to the nearest whole dollar.) |
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