Payback, Accounting Rate of Return, Present Value, Net Present value, Internal Rate of Return For discount factors use Exhibit 12B.1 and Exhibit 12B.2. All scenarios are independent of all other scenarios. Assume that all cash flows are after tax cash flows. in one of the following two projects. Either project will require an investment of $20,000. The expected cash flows for the tiwo projects follow. Assume that each project s Year ProjectA $6,000 8,000 10,000 10,000 10,000 Project B $ 6,000 8,000 10,000 3,000 3,000 3 and has the option to take her retirement as a lump sum of $450,000 or to receive $30,000 per year for 20 years. Wilma's required rate of retum is % b. wilrha Golding is retiring c. David Booth is interested in investing in some tools and equipment so that he can do independent drywalling. The cost of the tools and equipment is $ equipment will be $9,000 per year. The tools and equipment will last 6 years. that ity. She is currently the owner of a small manufacturing company and has the opportunity to acquire another small company's equipment d. Patsy Folson is evaluating what appea that the savings from internal production will be $75,000 per year. She estimates that the equpment wil last 10 years. The owne from internal would provide production is asking $400,000 for the equipment. Her company's cost of capital is 8%. of a part currently purchased externally. She estimates that Connection: What is the payback period for each of Kambry Day's projects? Round your answers to twe deamal places. years Project A years Project B evious Next Check My Work All work saved. PM If rapid payback is important, which project should he chasen? Project A V 2. Conceptual Connection: Which of Kambry's projects should be chosen based on the ARR? If required, round to the nearest percent Accounting rate of return (ARR) Project A: ARR Project B: ARR Project A 3. Assuming that wima Golding well live for another 20 years, should she take the lump sum or the annuity? Wilma should take the lump sum. v 4. Assuming a reared rate of return of 8% for David Booth, Calculate the NPV of the investment if requred round to the nearest dollar NPV Should David invest? s. Calculate the IRR for Pstsy Folson's project. Round your answer to the nearest percent Should Patsy acqure the equipment? Check My Work Payback, Accounting Rate of Return, Present Value, Net Present value, Internal Rate of Return For discount factors use Exhibit 12B.1 and Exhibit 12B.2. All scenarios are independent of all other scenarios. Assume that all cash flows are after tax cash flows. in one of the following two projects. Either project will require an investment of $20,000. The expected cash flows for the tiwo projects follow. Assume that each project s Year ProjectA $6,000 8,000 10,000 10,000 10,000 Project B $ 6,000 8,000 10,000 3,000 3,000 3 and has the option to take her retirement as a lump sum of $450,000 or to receive $30,000 per year for 20 years. Wilma's required rate of retum is % b. wilrha Golding is retiring c. David Booth is interested in investing in some tools and equipment so that he can do independent drywalling. The cost of the tools and equipment is $ equipment will be $9,000 per year. The tools and equipment will last 6 years. that ity. She is currently the owner of a small manufacturing company and has the opportunity to acquire another small company's equipment d. Patsy Folson is evaluating what appea that the savings from internal production will be $75,000 per year. She estimates that the equpment wil last 10 years. The owne from internal would provide production is asking $400,000 for the equipment. Her company's cost of capital is 8%. of a part currently purchased externally. She estimates that Connection: What is the payback period for each of Kambry Day's projects? Round your answers to twe deamal places. years Project A years Project B evious Next Check My Work All work saved. PM If rapid payback is important, which project should he chasen? Project A V 2. Conceptual Connection: Which of Kambry's projects should be chosen based on the ARR? If required, round to the nearest percent Accounting rate of return (ARR) Project A: ARR Project B: ARR Project A 3. Assuming that wima Golding well live for another 20 years, should she take the lump sum or the annuity? Wilma should take the lump sum. v 4. Assuming a reared rate of return of 8% for David Booth, Calculate the NPV of the investment if requred round to the nearest dollar NPV Should David invest? s. Calculate the IRR for Pstsy Folson's project. Round your answer to the nearest percent Should Patsy acqure the equipment? Check My Work