Use the NPV method to determine whether Vargas Products should invest in the following projects: Project...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Use the NPV method to determine whether Vargas Products should invest in the following projects: Project A: Costs $280,000 and offers eight annual net cash inflows of $57,000. Vargas Products requires an annual return of 14% on investments of this nature. Project B: Costs $385,000 and offers 9 annual net cash inflows of $73,000. Vargas Products demands an annual return of 12% on investments of this nature. . Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A. Project A: Years 1-8 Present value of annuity 0 0 Project A Project B Investment Net present value of Project A Calculate the NPV of Project B. Project B: Years 1-9 Present value of annuity Investment Net present value of Project B Requirement 2. What is the maximum acceptable price to pay for each project? Maximum Acceptable Price Project A Project B Net Cash Inflow Net Cash Inflow Annuity PV Factor (i=14%, n=8) + Annuity PV Factor (i-12%, n=9) Present Value Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.) Select the formula, then enter the amounts to calculate the profitability index of each project. Present Value = = = COO Profitability Index Requirements 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. 2. What is the maximum acceptable price to pay for each project? 3. What is the profitability index of each project? Round to two decimal places. Print Done X Use the NPV method to determine whether Vargas Products should invest in the following projects: Project A: Costs $280,000 and offers eight annual net cash inflows of $57,000. Vargas Products requires an annual return of 14% on investments of this nature. Project B: Costs $385,000 and offers 9 annual net cash inflows of $73,000. Vargas Products demands an annual return of 12% on investments of this nature. . Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A. Project A: Years 1-8 Present value of annuity 0 0 Project A Project B Investment Net present value of Project A Calculate the NPV of Project B. Project B: Years 1-9 Present value of annuity Investment Net present value of Project B Requirement 2. What is the maximum acceptable price to pay for each project? Maximum Acceptable Price Project A Project B Net Cash Inflow Net Cash Inflow Annuity PV Factor (i=14%, n=8) + Annuity PV Factor (i-12%, n=9) Present Value Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.) Select the formula, then enter the amounts to calculate the profitability index of each project. Present Value = = = COO Profitability Index Requirements 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. 2. What is the maximum acceptable price to pay for each project? 3. What is the profitability index of each project? Round to two decimal places. Print Done X
Expert Answer:
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Use the NPV method to determine whether Vargas Products should invest in the following projects: Project A costs $280,000 and offers eight annual net cash inflows of $56,000. Vargas Products...
-
1) Explain the components of a financial market and its relevance to Jagdambay Exports. Be explicit and explain to the CFO how financial markets differ from markets for physical assets and why that...
-
What is the difference between an assignment and a delegation? 2. What factors indicate that a third party beneficiary is an intended beneficiary? 3. How are most contracts discharged? 4. What is a...
-
At December 31, 2014, the records of Seacrest Enterprises provided the following selected and incomplete data: Required 1. Complete the following: Shares issued ___________ Shares outstanding...
-
The energy that is stored in a 25-F capacitor is w(t) = 12 sin2 377t. Find the current in the capacitor.
-
Discuss whether Sandy Oil plc can change its accounting policy to capitalise all of its E&E costs to match its competitor's accounting policy.
-
A 1-kg cart and a 2-kg cart are held together with a coupler that contains a small charge. The charge is exploded and sends the \(1-\mathrm{kg}\) cart rolling away at \(+4.0 \mathrm{~m} /...
-
Prepare general journal entries to record the transactions below for Spade Company by using the following accounts: Cash; Accounts Receivable; Office Supplies; Office Equipment; Accounts Payable; K....
-
1. In the system shown in figure, all surfaces are smooth. Rod is moved by external agent with acceleration 0.9 ms vertically downwards. Force exerted on the rod by the wedge will be Newtons.
-
Find point estimates for the mean and standard deviation of the Months Customer data in the Credit Risk Data file. Draw five random samples of sizes 50 and 250 from the data using the Sampling tool....
-
Use the chart to solve the following: Calculate the Marginal Cost at Q 100? Calculate the Marginal Cost at Q 200? Calculate the Average Total Cost at Q 200? Q P=D TC 0 $30.00 $3,000 100 $20.00 $4,500...
-
Design a function that removes all occurrences of a given integer from an array and returns the new length of the array. You must modify the input array in-place with O(1) extra memory. Input: nums =...
-
Please use Excel formulas to find the missing yellow fields and subsequently provide a breakeven analysis. Questions are: 1. Determine Total Sales 2. Determine Total Expenses 3. For Breakeven...
-
Ms. Frank is planning for a 25-year retirement period and wishes to withdraw a portion of her savings at the end of each year. She plans to withdraw $10,000 at the end of the first year, and then to...
-
Yummy Bunny Pastries Case Study, Bunny Frank's pastry business has been doing well since you helped her understand the role of production management in a successful business. Her output and sales...
-
Explain the difference between visionary leadership and transactional leadership ?
-
7. Problem 3.6. The comparison calorimeter is used to determine the specific heat of milk. The first cup is filled with 100g of distilled water having a specific heat of 4.18 kJ/kg K. The other cup...
-
The water in tank A is at 270 F with quality of 10% and mass 1 lbm. It is connected to a piston/cylinder holding constant pressure of 40 psia initially with 1 lbm water at 700 F. The valve is opened,...
-
Star Golf Products is considering whether to upgrade its equipment. Managers are considering two options. Equipment manufactured by Heatherwood Inc. costs $900,000 and will last six years and have no...
-
Refer to E8-44B. Tech Systems needs 78,000 optical switches next year (assume same relevant range). By outsourcing them, Tech Systems can use its idle facilities to manufacture another product that...
-
Rathke Industries manufactures and sells a single product. The controller has prepared the following income statement for the most recent year: The company produced 14,000 units and sold 8,500 units...
-
Associated British Foods is a diversified international food, ingredients and retail group with sales of 12.9bn, and 118,000 employees in 47 countries across Europe, southern Africa, the Americas,...
-
WHSmith plc is one of the UKs leading retailers and is made up of two core businesses Travel and High Street. Extracts from Annual report and accounts About us WHSmith has a presence in a wide range...
-
Rio Tinto is a leading global mining group that focuses on finding, mining and processing the Earths mineral resources. Our vision is to be a company that is admired and respected for delivering...
Study smarter with the SolutionInn App