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Marigold Company is considering investing in a project that will cost $160,700 and have no salvage value at the end of its 5-year life. It is estimated that the project will generate annual cash flows of $42,400 each year. The company requires a 9% rate of return and uses the following compound interest table: Period 5 6% 4.21236 3.99271 8% Present Value of an Annuity of 1 9% 3.88965 10% 3.79079 11% 12% 3.69590 3.60478 15% 3.35216

Marigold Company is considering investing in a project that will cost $160,700 and have no salvage value at the end of its 5-year life. It is estimated that the project will generate annual cash flows of $42,400 each year. The company requires a 9% rate of return and uses the following compound interest table: Period 5 6% 4.21236 3.99271 8% Present Value of an Annuity of 1 9% 3.88965 10% 3.79079 11% 12% 3.69590 3.60478 15% 3.35216

FINANCIAL ACCOUNTING
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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Marigold Company is considering investing in a project that will cost $160,700 and have no salvage value at the end of its 5-year life. It is estimated that the project will generate annual cash flows of $42,400 each year. The company requires a 9% rate of return and uses the following compound interest table: Period 5 Click here to 6% 4.21236 8% 3.99271 Present Value of an Annuity of 1 9% 3.88965 10% 3.79079 11% 12% 3.69590 3.60478 15% 3.35216
Transcribed Image Text:Marigold Company is considering investing in a project that will cost $160,700 and have no salvage value at the end of its 5-year life. It is estimated that the project will generate annual cash flows of $42,400 each year. The company requires a 9% rate of return and uses the following compound interest table: Period 5 Click here to 6% 4.21236 8% 3.99271 Present Value of an Annuity of 1 9% 3.88965 10% 3.79079 11% 12% 3.69590 3.60478 15% 3.35216
Compute the net present value and the profitability index of the project. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round profitability index to 2 decimal places, e.g. 15.25 and net present value to 0 decimal places, e.g. 5,275.) Net present value $ Profitability index (b) 4.221 1.03 Show Transcribed Text Internal rate of return G C Compute the internal rate of return on this project. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to O decimal places, eg. 11%)
Transcribed Image Text:Compute the net present value and the profitability index of the project. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round profitability index to 2 decimal places, e.g. 15.25 and net present value to 0 decimal places, e.g. 5,275.) Net present value $ Profitability index (b) 4.221 1.03 Show Transcribed Text Internal rate of return G C Compute the internal rate of return on this project. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to O decimal places, eg. 11%)
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