net present value method, internal rate of return method, and analysis

Net Present Value Method, Internal Rate of Return Method, and Analysis The management of Quest Media Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Year Radio Station TV Station $410,000 $820,000 410,000 820,000 410,000 820,000 410,000 820,000 Present Value of an Annuity of $1 at Compound Interest Year 6% 3 2 0.943 1.833 .673 3.465 4.212 4.917 10% 0.909 1.736 2.487 3.170 3.791 4.355 4 12% 15% 20% 0.893 0.870 0.833 1.690 1.626 1.528 2.402 2.283 2.106 3.037 2.855 2.589 3.605 3.352 2.991 4.111 3.784 3.326 4,564 4.160 3.605 4.968 4.487 3.837 5.328 4.772 4.031 5.6505.0194 .192 6 7 5 .582 4.868 B 6.210 5.335 9 6.802 5.759 107.3606 .145 The radio station requires an investment of $1,061,490, while the TV station requires an investment of $2,341,100. No residual value is expected from either project. Required: 1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar Radio Station TV Station B 6.210 5.335 4.968 4.482 3837 9 6 ,802 5.759 5.328 4.772 4.031 107.360 6.145 5.6505.0194.192 The radio station requires an investment of $1,061,490, while the TV station requires an investment of $2,341,100. No residual value is expected from other project. Required: Ia. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar Radio Station TV Station Present value of annual net cash nows Less amount to be invested Net present value 1b. Compute a present value index for each project. If required, round your answers to two decimal places Present Value Index Radio Station TV Station 2. Determ ne the internal rate of return for each project by (a) computing a present value factor for an annuity of 51 and (b) using the present value of an annuit table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent Radio Station TV Station Present value factor for an annuity of $1 Internal rate of retum is a better financial opportunity compared to the 3. The net present value, present value index, and internal rate of return all indicate that the although both investments meet the minimum return criterion of 10%