Please no written by hand solutions Giroud plc is considering two alternative investment opportunities. Each of the two projectshas an expected life of five years and requires an initial investment of$100,000.A feasibility study costing $5,000 examining the benefits and costs of Project A has beenundertaken and paid for. It is expected that the machine will be sold for$32,000 at the end of the project. Additional working capital of $8,000 is required duringthe life of the new machine; this is expected to be recovered at the end of the project.Cash savings arising from Project A are expected to be as follows:Year Project A$35,00030,00030,00020,00020,00012345A feasibility study relating to Project B costing $14,000 has been contracted for but not yetcompleted or paid for. This machine will be scrapped at the end of its life. Cash savings ineach of the five years are expected to be $26,000. The company's cost of capital is 12%.Required:For each project unless stated otherwise:(a) compute the net present value(b) compute the 'Internal Rate of Return' of Project B only(c) compute the accounting rate of return based on the average investment(d) compute the payback period based on actual cash flows(e) explain what you consider to be the advantages and disadvantages of each of thefour models used in (a), (b), (c) and (d) above(f) on the basis of the results of (a) to (e) above, which of the two projects do youconsider to be the better and why?

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Description: Please no written by hand solutions Giroud plc is considering two alternative investment opportunities. Each of the two projectshas an expected life of five years and requires an initial investment of$100,000.A feasibility study costing $5,000 examin

Project A Year Annual Net cashflows pv factors @12% PV of cashflows 0 -108000 1…

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For each project unless stated otherwise: (a) compute the net present value (b) compute the 'Internal Rate of Return' of Project B only (c) compute the accounting rate of return based on the average investment

For each project unless stated otherwise: (a) compute the net present value (b) compute the 'Internal Rate of Return' of Project B only (c) compute the accounting rate of return based on the average investment

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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