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 Heckel Communications Inc. is considering two capital Investment projects. The estimated net cash flows from each project are as follows: Year Radio Station $560,000 560,000 560,000 560,000 2 TV Station $1,120,000 1,120,000 1,120,000 1,120,000 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.893 0.833 0.909 1.736 0.870 1.626 1.833 1.690 1.528 2. 106 2.673 2.487 2.283 3,465 3.170 2.589 2.402 3,037 3.605 4.111 4.212 3.791 2.991 3.326 4.917 4.355 5.582 4.564 4.868 3.605 2.855 3.353 3.785 4.160 4.487 4.772 5.019 6.210 5.335 4.968 3.837 4,031 4.192 6.802 7.360 5.759 6.145 5.328 5.650 10 the project The radio station requires an investment of $1,598,800, while the TV station requires an investment of $3,401.440. No residual value is expected from Previous Next Check My Work The radio station requires an investment of $1,598,800, while the TV station requires an investment of $3,401,440. 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 the net present value is negative, enter a negative amount Radio Station TV Station Present value of annual net cash flows Amount to be invested Net present value 1b. Compute a present value Index for each project. Round your answers to two decimal places. Present Value Index (Rounded) Radio Station TV Station 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 table above. Round the present value factor to three decimal places Radio Station TV Station (a). Present value factor for an annuity of 51 (b). Internal rate of return 3. Which of the following is an advantage that the internal rate of return method has over the net present value method when comparing projects? The internal rate of return s to compute Check My Work eBook Calculator Hulu Sun LOW Present value of annual net cash flows Amount to be invested Net present value 1b. Compute a present value index for each project. Round your answers to two decimal places Present Value Index (Rounded) Radio Station TV Station 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of table above. Round the present value factor to three decimal places Radio Station TV Station (a). Present value factor for an annuity of $1 (b). Internal rate of return 15 % 12 % 3. Which of the following is an advantage that the internal rate of return method has over the net present value method when comparing projects? a. The internal rate of return is easier to compute. b. The internal rate of return method does not make an assumption about reinvestment rates while the net present value method does. c. Projects of different sizes are placed on a common basis and can be easily compared based on their internal rates of return. d. The internal rate of return method considers the present value of an investment's future cash flows while the net present value method does not Select your answer: Previous Next > Check My Work