acc1 2. A project that provides annual cash flows of $15,300 for nine years costs $74,000today. Is this a good project if the required return is 8 percent? What if it's 20percent? At what discount rate would you be indifferent between accepting theproject and rejecting it? SHOW WORK EXACTLY HOW YOU WOULD TYPE IT INTOEXCELAnnual cash flows$15,300RequiredYearsInput area:Costs$74,000Required Return8%9Return20%(Use cells A6 to B10 from the given information to complete thisquestion. You must use the built-in Excel function to answer thisquestion.)Output area:NPV at 8% NPV at 20% IRR

Net present value is a capital budgeting technique to take decision about whether the project should…

Answered: 2. A project that provides annual cash…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 6PB: There are two projects under consideration by the Rainbow factory. Each of the projects will require...

See similar textbooks

Similar questions

Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two, $2,500 in year three, $3,000 in year four and $2,000 in year five. What is the NPV using 8% as the discount rate?
Project X costs $10,000 and will generate annual net cash inflows of $4,800 for five years. What is the NPV using 8% as the discount rate?
Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment or $28.000 and is expected to generate the following cash flows: If the discount rate is 5% compute the NPV of each project and make a recommendation of the project to be chosen.
The Ulmer Uranium Company is deciding whether or not to open a strip mine whose net cost is $4.4 million. Net cash inflows are expected to be $27.7 million, all coming at the end of Year 1. The land must be returned to its natural state at a cost of $25 million, payable at the end of Year 2. Plot the project’s NPV profile. Should the project be accepted if r = 8%? If r = 14%? Explain your reasoning. Can you think of some other capital budgeting situations in which negative cash flows during or at the end of the project’s life might lead to multiple IRRs? What is the project’s MIRR at r = 8%? At r = 14%? Does the MIRR method lead to the same accept-reject decision as the NPV method?
Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?
1. A project that provides annual cash flows of $1,200 for nine years costs $6,000 today. Is this a good project if the required return is 8 percent? What if it's 24 percent? At what discount rate would you be indifferent between accepting the project and rejecting it? The graph displays the project's NPV profile NPV 1 0 -1 0.1 0.2 NPV Profile 0.3 0.4 Interest Rate
1. A project that provides annual cash flows of $53, 500 for 10 years costs $308,000 today. (1) Based on the NPV decision rule, is this a good project if the required return is 10% ? What if the required return is 20% ? (2) At what discount rate would you be indifferent between accepting the project and rejecting it?
Your company has a project available with the following cash flows: Year Cash Flow -$81,100 21,500 1 2 25,000 3 30,800 26,000 19,800 4 If the required return is 14 percent, should the project be accepted based on the IRR? Multiple Cholce Yes, because the IRR Is 16.41 percent. Yes, because the IRR Is 17.07 percent. No, because the IRR Is 17.07 percent. Yes, because the IRR Is 15.75 percent. No, because the IRR Is 15.75 percent.
A project has the following cash flows: Year Cash Flow 0 –$ 16,100 1 6,800 2 8,100 3 6,600 a. What is the NPV at a discount rate of zero percent? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What is the NPV at a discount rate of 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the NPV at a discount rate of 20 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is the NPV at a discount rate of 29 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Your company has a project available with the following cash flows: Year Cash Flow -$80,700 21,700 25,400 31,200 3 4 26,200 20,200 If the required return is 15 percent, should the project be accepted based on the IRR? Multiple Cholce No. because the IRR Is 16.51 percent. Yes, because the IRR Is 17.88 percent. Yes, because the IRR Is 17.19 percent. Yes, because the IRR Is 16.51 percent. No, because the IRR Is 17.88 percent.

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

Financial And Managerial Accounting

Accounting

ISBN:

9781337902663

Author:

WARREN, Carl S.

Publisher:

Cengage Learning,

SEE MORE TEXTBOOKS