28cton1Lawrence Corporation is considering the purchase of a new piece of equipment. When discounted at the cost of capital of 17%, the project has a net present va$24,670. When discounted at rate of 21%, the project has a net present value of $(29,010). The Internal rate of return of the project is:ОzeroMultiple Choicebetween 17% and 21%greater than %between zero and 17%

Given:At 17% discount rate, NPV = $24,670At 21% discount rate, NPV = $(29,010) Step 1: Understanding…

Answered: 28 cton 1 Lawrence Corporation is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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:55 Alpha Company is considering a project with the following cash flows: • Year 0 = (14,800) • Year 16,100 . Year 2= 7,400 • Year 3 = 5,100 • Year 4 = 4,700 What is the payback period?
21. NPV and Payback Period Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has historically used a three-year cutoff for projects. The required return is 10 percent. Ι Year Project F Project G 0 -$195,000 -$298,000 1 98,400 71,600 2345 86,300 94,500 81,600 123,600 72,000 166,800 64,800 187,200 a. Calculate the payback period for both projects. b. C. Calculate the NPV for both projects. Which project, if any, should the company accept?
Question 15 Company 15 is considering undertaking a new project. The financial controller has computed Net Present Value (NPV) of the project at two different discount rates. The NPV at a discount rate of 12% is £4,700 positive and at a discount rate of 20%, it is £7,400 negative. You are required to compute the Internal Rate of Return (IRR) using linear interpolation or extrapolation. The Internal Rate of Return of this project is which of the following: A 23.1% B 16.9% C 15.1% D 8.9%
QS 11-17 (Algo) Net present value of annuity and salvage value LO P3 Pablo Company is considering buying a machine that will yield income of $3,100 and net cash flow of $14,700 per year for three years. The machine costs $45,900 and has an estimated $11,100 salvage value. Pablo requires a 10% return on its investments. Compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your present value factor to 4 decimals.) Years 1-3 Year 3 salvage Totals [Initial investment Net present value Net Cash Flows X PV Factor 14,700 x 11,100 x $ S = = Present Value of Net Cash Flows $ 0 0
8-16 Three mutually exclusive alternatives are being A considered. Initial investment Annual net income Rate of return A B $43,000 $24,000 4,150 2,500 7.3% 8.3% с $17,000 1,700 6.0% Each alternative has a 20-year useful life with no salvage value. (a) Construct a choice table for interest rates from 0% to 100%. (b) If the minimum attractive rate of return is 7%, which alternative should be selected?
out of question A company is considering a project that requires an initial cost of $8,000. The project will great dea net cash inflows of $100 in year one, $700 in year two, $6,000 in year three, $11,000 inyear four and $1 in year five. What is the NPV using 4% as the discount rate? NOTE: Enter amounts rounded to two decimals (e.g., 78.76 or 40.00) Net Cash Inflow Year 0 2 3 4 5 $100 $700 $6,000 $11,000 $12,000 NPV Total S $ $
Q3 7a 7. XYZ Co. is evaluating whether to invest in a project with the following information: Project cost = $950,000 Project life = five years Projected number of units sold per year = 10,000 Projected price per unit = $200 Projected variable cost per unit = 150 Fixed costs per year = $150,000 Required rate of return = 15% Marginal tax rate = 35% Assume straight-line depreciation to zero over five years, and ignore the half-year rule for accounting for depreciation. a. Calculate the cash break-even sales quantity for this project.
5.
#3 HE Year Project A Project B 0 -$20,000 -$23,000 1 2 3 15,200 5,900 2,100 14,300 8.100 7,100 Suppose the company uses the NPV rule to rank these two projects. Which project should be chosen if the appropriate discount rate is 15 percent?
Aa 27.
2
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