Vista Company is considering two new projects, each requiring an equipment investment of $97,000. Each project...

Transcribed Image Text:

Vista Company is considering two new projects, each requiring an equipment investment of $97,000. Each project will last for three years and produce the following cash inflows: Year Cool Hot 1 $38,000 $42,000 43,000 42,000 48,000 42,000 129,000 $126,000 The equipment will have no salvage value at the end of its three-year life. Vista Company uses straight-line depreciation and requires a minimum rate of return of 12%. Present value data are as follows: Present Value of 1 Period 12% 1 .893 .797 .712 Present Value of an Annuity of 1 (a) Period 12% 1 .893 1690 3 2.402 Your answer is correct. Compute the net present value of each project. Project Cool Net present value eTextbook and Media Solution 5381 Project Hot 3884 (b) Compute the profitability index of each project. (Round answers to 2 decimal places, eg. 15.25.) (c) Project Cool Profitability index Save for Later Project Hot Attempts: 1 of 1 used Attempts: 0 of 1 used Submit Answer Vista Company is considering two new projects, each requiring an equipment investment of $97,000. Each project will last for three years and produce the following cash inflows: Year Cool Hot 1 $38,000 $42,000 43,000 42,000 48,000 42,000 129,000 $126,000 The equipment will have no salvage value at the end of its three-year life. Vista Company uses straight-line depreciation and requires a minimum rate of return of 12%. Present value data are as follows: Present Value of 1 Period 12% 1 .893 .797 .712 Present Value of an Annuity of 1 (a) Period 12% 1 .893 1690 3 2.402 Your answer is correct. Compute the net present value of each project. Project Cool Net present value eTextbook and Media Solution 5381 Project Hot 3884 (b) Compute the profitability index of each project. (Round answers to 2 decimal places, eg. 15.25.) (c) Project Cool Profitability index Save for Later Project Hot Attempts: 1 of 1 used Attempts: 0 of 1 used Submit Answer