Question: Exercise 24-18 (Algo) Net present value, unequal cash flows, and internal rate of return LO P3, P4 Phoenix Company is considering investments in projects C1
Exercise 24-18 (Algo) Net present value, unequal cash flows, and internal rate of return LO P3, P4
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $252,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
| Net cash flows | Project C1 | Project C2 |
|---|---|---|
| Year 1 | $ 20,000 | $ 104,000 |
| Year 2 | 116,000 | 104,000 |
| Year 3 | 176,000 | 104,000 |
| Totals | $ 312,000 | $ 312,000 |
a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.
Required B
The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.)
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