Following is information on two alternative investments. Beachside Resort is considering building a new pool or spa. The company requires a 6% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Initial investment Net cash flows in: Year 1 Year 2 Year 3 Year 4 Year 5 Pool Spa $ (185,325) $ (146,960) 40,000 43,000 83,295 93,400 72,000 42,000 48,000 64,000 84,000 30,000 a. For each investment project compute the net present value. b. For each investment project compute the profitability index. c. If the company can only select one project, which should it choose on the basis of profitability index?

Following is information on two alternative investments. Beachside Resort is considering building a new pool or spa. The company requires a 6% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Initial investment Net cash flows in: Year 1 Year 2 Year 3 Year 4 Year 5 Pool Spa $ (185,325) $ (146,960) 40,000 43,000 83,295 93,400 72,000 42,000 48,000 64,000 84,000 30,000 a. For each investment project compute the net present value. b. For each investment project compute the profitability index. c. If the company can only select one project, which should it choose on the basis of profitability index?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8TP: Fenton, Inc., has established a new strategic plan that calls for new capital investment. The...

See similar textbooks

Similar questions

Following is information on two alternative investments being considered by Jolee Company. The company requires a 8% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project A $(171,325) Project B $(159,960) Initial investment Expected net cash flows in: 35,000 59,000 55,000 Year 1 54,000 45,000 87,295 81,400 65,000 Year 2 Year 3 73,000 20,000 Year 4 Year 5 a. For each alternative project compute the net present value. b. For each alternative project compute the profitability index. If the company can only select one project, which should it choose? Complete this question by entering your answers in the tabs below. Required A Required B For each alternative project compute the net present value.
Following is information on two alternative investments being considered by Jolee Company. The company requires a 8% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project A Project B Initial investment $ (172,325 ) $ (146,960 ) Expected net cash flows in: Year 1 50,000 31,000 Year 2 43,000 44,000 Year 3 89,295 60,000 Year 4 90,400 77,000 Year 5 54,000 33,000 a. For each alternative project compute the net present value.b. For each alternative project compute the profitability index. If the company can only select one project, which should it choose?
Dock Company is considering a capital investment in machinery: E (Click the icon to view the data.) 8. Calculate the payback. 9. Calculate the ARR. Round the percentage to two decimal places. 10. Based on your answers to the above questions, should Dock invest in the machinery? 8. Calculate the payback. Payback years - X Data Table Initial investment $ 1,500,000 Residual value 350,000 Expected annual net cash inflows 500,000 Expected useful life 4 years Required rate of return 9% Print Done
Calculate the internal rates of return of the following investment: Net investment -$1,100 Year 0 Net cash flows +6,500 Year 1 -11,400 Year 2 +6,000 Year 3 Round your answers to the nearest whole number and enter them in ascending order. IRR1: 0% IRR2: % IRR3: %
Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project A Project B Initial investment $ (181,325 ) $ (155,960 ) Expected net cash flows in: Year 1 35,000 27,000 Year 2 54,000 43,000 Year 3 77,295 61,000 Year 4 91,400 77,000 Year 5 65,000 20,000 a. For each alternative project compute the net present value.b. For each alternative project compute the profitability index. If the company can only select one project, which should it choose? For each alternative project compute the net present value. Project A Initial Investment $181,325 Chart Values are Based on: i = % Year Cash Inflow x PV Factor =…
Consider the cash flows for the following investment projects. Assume that MARR=12%/year. A B 0 -PhP 1,000 -PhP 1,000 - PhP2,000 1 900 600 900 2 500 500 900 3 100 500 900 4 50 100 900 Which project should be selected using incremental analysis (AW method)? ANSWERS: AWA = PhP Blank 1 AWB = PhP Blank 2 AWc = PhP Blank 3 %3D AW (B-A) = PhP BIlank 4 AW (C-B) = PhP Blank 5 Investment Blank 6 (use capital letter) is better.
Following is information on two alternative investments projects being considered by Tiger Company. The company requires a 10% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Initial investment Project X1 $ (98,000) Project X2 $ (144,000) Net cash flows in: Year 1 36,000 76,500 Year 2 46,500 Year 3 71,500 66,500 56,500 a. Compute each project's net present value. b. Compute each project's profitability index. If the company can choose only one project, which should it choose on the basis of profitability index? Complete this question by entering your answers in the tabs below. Required A Required B Compute each project's net present value. Note: Round your answers to the nearest whole dollar. Net Cash Flows Present Value of 1 at 10% Present Value of Net Cash Flows Project X1 Year 1 $ 36,000 Year 2 46,500 Year 3 71,500 Totals $ 154,000 $ 0 Initial investment Net present value $ Project X2 Year 1 $…
Following is information on two alternative investments. Beachside Resort is considering building a new pool or spa. The company requires a 10% return from its investments. Initial investment Net cash flows in: Year 1 Year 2 Year 3 Year 4 Year 5 Pool Spa IRR Pool $ (177,000) % % 41,700 57,700 81,995 92,100 66,700 Compute the internal rate of return for each of the projects using excel functions. Note: Round your answers to 2 decimal places. Spa $ (122,000) 33,700 51,700 67,700 73,700 25,700
Damien offers you a sequence of end-of-year cash flows for an investment as follows: Year 1 2 3 4 4 What is the value of the cash flows if the opportunity cost is 6 percent? (Round to the nearest dollar). Please click on the following link to access a blank worksheet Click to open:: O $8.392 $8.598 Cash Flow $4,000 $3,000 $2,000 $1,000 $8.734 $8.915
X-treme Vitamin Company is considering two investments, both of which cost $20,000. The cash flows are as follows: Year Project A Project B 1 $ 23,000 $ 20,000 2 10,000 9,000 3 10,000 15,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.) project A 0.87 years project B 1 year b-1. Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 7% return from its investments (PV of $1. EV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Initial investment Net cash flows in: Year 1 Year 2 Year 3 Required A Required B Project X1 Year 11 Year 2 Year 3 a. Compute each project's net present value. b. Compute each project's profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index? Totals Initial investment Net present value Complete this question by entering your answers in the tabs below. Project X2 Year 1 Year 2 Year 3 Totais Initial investment S Project X1 $ (116,000) Compute each project's net present value. (Round your final answers to the nearest dollar) Net Cash Flows Present Value of Net Cash Flows S 43,000 53,500 78,500 Required C O 0 Present Value of 1 at 7% Project X2 $ (192,000) $ 87,000 77,000…
Consider the cash flows for the following investment projects. Assume that MARR=12%/year. A B C 0 - PhP 1,000 – PhP 1,000 - PhP2,000 1 900 600 900 2 500 500 900 100 500 900 4 50 100 900 Which project should be selected using incremental analysis (AW method)? ANSWERS: AWA = PhP Blank 1 AWB = PhP Blank 2 AWC = PhP Blank 3 AW (B-A) = PhP Blank 4 AW (C-B) = PhP Blank 5 Investment Blank 6 (use capital letter) is better.