Data table Year Plan Alpha Plan Beta $ 1,600,000 $ 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 $ 16,000,000 $ Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total 1,600,000 2,300,000 3,000,000 2,300,000 1,600,000 1,200,000 1,100,000 1,000,000 900,000 1,000,000 16,000,000 any is considering two capital investments. Both investments have an initial cost of $10,000,000 ash inflows of $16,000,000 over 10 years. Langley requires a 10% rate of return on this type of pected net cash inflows are as follows: Requirements 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? 2. Explain the relationship between NPV and IRR. Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 1? Why or why not? 3. After further negotiating, the company can now invest with an initial cost of $9,500,000 for both plans. Recalculate the NPV and IRR. Which plan, if any, should the company pursue? Print Done
Data table Year Plan Alpha Plan Beta $ 1,600,000 $ 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 $ 16,000,000 $ Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total 1,600,000 2,300,000 3,000,000 2,300,000 1,600,000 1,200,000 1,100,000 1,000,000 900,000 1,000,000 16,000,000 any is considering two capital investments. Both investments have an initial cost of $10,000,000 ash inflows of $16,000,000 over 10 years. Langley requires a 10% rate of return on this type of pected net cash inflows are as follows: Requirements 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? 2. Explain the relationship between NPV and IRR. Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 1? Why or why not? 3. After further negotiating, the company can now invest with an initial cost of $9,500,000 for both plans. Recalculate the NPV and IRR. Which plan, if any, should the company pursue? Print Done
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Langley Company is considering two capital investments. Both investments have an initial cost of $10,000,000 and total net
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