Ranking Investment Proposals: Payback Period, Accounting Rate of Return, and Net Present Value Presented is information pertaining to the cash flows of three mutually exclusive investment proposals: Proposal X Proposal Y Proposal Z $92,000 $92,000 $92,000 Initial investment Cash flow from operations Year 1 Year 2 Year 3 Disinvestment Life (years) 90,000 2,000 47,500 0 3 years 46,000 92,000 46,000 47,500 0 0 3 years 1 year Select the best investment proposal using the payback period, the accounting rate of return on initial investment, and the net present value criteria. Assume that the organization's cost of capital is 14 percent. Note: Follow rounding instructions noted for each computation. Use a negative sign with your answers, when appropriate. Proposal Z Best proposal 0x Z → 0✓✔ X,Y 0 X X Payback period (years) Accounting rate of return: Round answers to 4 decimal places. Net present value; Round answers to nearest whole number. Proposal X 0x 0 x 0 x Proposal Y ox ox 0x ♦ ♦
Ranking Investment Proposals: Payback Period, Accounting Rate of Return, and Net Present Value Presented is information pertaining to the cash flows of three mutually exclusive investment proposals: Proposal X Proposal Y Proposal Z $92,000 $92,000 $92,000 Initial investment Cash flow from operations Year 1 Year 2 Year 3 Disinvestment Life (years) 90,000 2,000 47,500 0 3 years 46,000 92,000 46,000 47,500 0 0 3 years 1 year Select the best investment proposal using the payback period, the accounting rate of return on initial investment, and the net present value criteria. Assume that the organization's cost of capital is 14 percent. Note: Follow rounding instructions noted for each computation. Use a negative sign with your answers, when appropriate. Proposal Z Best proposal 0x Z → 0✓✔ X,Y 0 X X Payback period (years) Accounting rate of return: Round answers to 4 decimal places. Net present value; Round answers to nearest whole number. Proposal X 0x 0 x 0 x Proposal Y ox ox 0x ♦ ♦
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter15: Capital Investment Analysis
Section: Chapter Questions
Problem 15.3.2P
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