Question: Fargo Industries uses the Net Present Value method to make investment decisions and requires a 15% return on all investments. The company is considering two

Fargo Industries uses the Net Present Value method to make investment decisions and requires a 15% return on all investments. The company is considering two different investments. Each requires an initial investment of $15,000 and will produce cash flows as follows:

Year Investment A Investment B

1 8000 0

2 8000 0

3 8000 24000

Which of the following is NOT true concerning these investments?

The payback period for Investment A is shorter than that for Investment B.

Investment B carries higher risk than Investment A.

The net present value of these investments is the same.

The internal rate of return of Investment A exceeds that of Investment B.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

The following relates to a proposed equipment purchase: Initial investment Salvage value Estimated useful life Annual net cash flows Annual depreciation expense $ 140,200 $ 3,800 4 years $ 45,900 $...

33. Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each...

32. Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each...

Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each...

3 00:40:48 Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments....

Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each...

a) Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each...

5a) Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each...

what would this answer be ? Fargo Industries uses the Net Present Value method to make investment decisions and requires a 15% return on all investments. The company is considering two different...

Winger Corp. sells a product for $5 per unit. Fixed costs are $200,000 and variable costs per unit are 60% of the selling price. What sales would be required for Winger Corp. to earn a profit of...

What would be the impact on the cash budget if 30% ( instead of 25%) of credit sales is collected in the month of the sale? (Note this is the only change). What would be the impact on the cash...

E7.3 (LO 1, 2) (Inventoriable Costs) Assume that in an annual audit of Webber AG on December 31, 2025, you find the following transactions near the closing date. 1. A special machine, fabricated to...

Hint(s) Check My Work A company has two alternatives for meeting a customer requirement for 3,000 units of a specialty molding. If done in-house, fixed cost would be $340,000 with variable cost at...

3. What is my goal?

2. I try to be as logical as possible

1. To understand the prerequisites for personal communication mastery.