Use the NPV method to determine whether Juda Products should invest in the following projects: Project
Question:
• Project A: Costs $290,000 and offers seven annual net cash inflows of $57,000. Juda Products requires an annual return of 14% on investments of this nature.
• Project B: Costs $395,000 and offers 10 annual net cash inflows of $70,000. Juda Products demands an annual return of 12% on investments of this nature.
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
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Related Book For
Horngrens Financial and Managerial Accounting
ISBN: 978-0133866292
5th edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
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