Consider the following proposed cash flows:nCash Flow 1Cash Flow 2Cash Flow 3Cash Flow 4Cash Flow 50-$15,000$5,000$-10,000-$20,000-$25,0001$7,000$0$2,000$25,000-$5,0002$7,000-$3,000-$5,000-$03$7,000-$4,000$20,000-$50,000Cash FlowsIdentify whether each cashflow is simple or nonsimple and whether each is a borrowing cash flow or investment cash flow Find the IRR of each investment (simple and non-simple). The company is only interested in simple investment cash flows (not borrowing cash flows and not non-simple investments). If all of the simple investment alternatives are mutually exclusive and the MARR is 15%, which alternative should be chosen? You must show your work and rational for selecting the chosen project

Simple cash flow that where initial cash flows are negative and only one sign change occurs in the…

Answered: Consider the following proposed cash…

Consider the following proposed cash flows: n Cash Flow 1 Cash Flow 2 Cash Flow 3 Cash Flow 4 Cash Flow 5 0 -$15,000 $5,000

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

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Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16EA: Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in...

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

Consider the following proposed cash flows:

n	Cash Flow 1	Cash Flow 2	Cash Flow 3	Cash Flow 4	Cash Flow 5
0	-$15,000	$5,000	$-10,000	-$20,000	-$25,000
1	$7,000	$0	$2,000	$25,000	-$5,000
2	$7,000	-$3,000	-$5,000	-	$0
3	$7,000	-$4,000	$20,000	-	$50,000

Cash Flows

Identify whether each cashflow is simple or nonsimple and whether each is a borrowing cash flow or investment cash flow
Find the IRR of each investment (simple and non-simple).
The company is only interested in simple investment cash flows (not borrowing cash flows and not non-simple investments). If all of the simple investment alternatives are mutually exclusive and the MARR is 15%, which alternative should be chosen? You must show your work and rational for selecting the chosen project

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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