FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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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- Perez Company is considering an investment of $26,945 that provides net cash flows of $8,500 annually for four years.(a) What is the internal rate of return of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)(b) The hurdle rate is 7%. Should the company invest in this project on the basis of internal rate of return?arrow_forwardTurner Hardware is adding a new product line that will require an investment of $1,530,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $320,000 the first year, $265,000 the second year, and $230,000 each year thereafter for eight years. The investment has no residual value. Compute the payback period. First enter the formula, then calculate the payback period. (Round your answer to two decimal places.) Full years Amount to complete recovery in next year Projected cash inflow in next year )= Payback )= yearsarrow_forwardFB Company is considering investing in two construction projects, and he developed the following estimates of the cash flows. His required return is 10% and views these projects as equally risky. Year Project 1 cash flow project 2 cash flow 0 -550000 -700000 1 150000 200000 2 200000 150000 3 150000 250000 4 150000 150000 5 100000 150000 Required: a) Calculate the net present value (NPV) of each project, assess its acceptability, and indicate which project is best using NPV. b) Calculate the profitability index (PI) of each project, assess its acceptability, and indicate which project is best using PI. c) If both the projects have recorded a positive NPV value and the projects are mutually exclusive, which projects would you recommend for FB Company to undertake? Why?arrow_forward
- Salsa Company is considering an investment in technology to improve its operations. The investment costs $250,000 and will yield the following net cash flows. Management requires a 7% return on Investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year Net cash Flow 1 $ 48,400 2 52,500 3 76,200 4 94,700 5 125,100 Required: 1. Determine the payback period for this Investment. 2. Determine the break-even time for this Investment. 3. Determine the net present value for this Investment. 4. Should management invest in this project based on net present value? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine the break-even time for this investment. (Enter cash outflows with a minus sign. Round your break-even time answer to 1 decimal place.) 1 at 7% Year Net Cash Flows Present Value of Present Value of Net Cash Flows per Year Initial investment $ (250,000) Year 1…arrow_forwardUse the information below to answer Question#40: GIVEN: The XYZ Company is considering the following project with its corresponding financial data. The Company requires a 9% return from its investments. $ 500,000 $ 200,000 $ 225,000 $ 245,000 Initial investment: Expected Cash in-flow Year 1: Expected Cash in-flow Year 2: Expected Cash in-flow Year 3: Present Value Factor of 1 at 9%: n=1: 0.91743 n=2: 0.84168 n=3: 0.77218 40) Choose from one of the following that accurately depicts this decision: A) This investment should not be considered because NPV is a negative $62,048 B) This învestment should be considered because NPV equals positive $62,048 C) This investment should be considered because the IRR for this investment is obviously less than its Required Rate of Return D) B and Care both correctarrow_forwardPerez Company is considering an investment of $20,957 that provides net cash flows of $6,900 annually for four years. (a) What is the internal rate of return of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals. (b) The hurdle rate is 9%. Should the company invest in this project on the basis of internal rate of return? Complete this question by entering your answers in the tabs below. Required A Required B What is the internal rate of return of this investment? Present value factor Internal rate of return % Required A Required Barrow_forward
- aaarrow_forwardWavy Inc is examining a project that requires an initial investment of -10 million today. This will be followed by several years of positive incremental after-tax cash flows. However, during the last year of the project's life Wavy expects that the incremental cash flow will again be negative. By which method should Wavy determine whether or not to invest? A) Both NPV or IRR are fine, as they must arrive at same investment decision B) IRR, because there will be no NPV solution in this case C) Neither NPV or IRR are useful in this situation D) NPV, since this project will have two IRRsarrow_forwardVijayarrow_forward
- Please answer fast without plagiarism and introduction pleasearrow_forwardSalsa Company is considering an investment in technology to improve its operations. The investment costs $241,000 and will yield the following net cash flows. Management requires a 10% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year Net cash Flow 1 $ 48, 200 2 53,900 3 76, 400 4 95,500 5 126,500 Required: Determine the payback period for this investment. Determine the break - even time for this investment. Determine the net present value for this investment. Should management invest in this project based on net present value?arrow_forwardPlease provide correct solution for correct answerarrow_forward
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