FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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- A project has cash flows of –$148,000, $43,000, $87,000, and $51,500 for Years 0 to 3, respectively. The required rate of return is 11 percent. Based on the internal rate of return of Blank 1 percent for this project, you should Blank 2 the project. Enter your answer in the first blank as a percent rounded to 2 decimal places, e.g., 32.16. Also enter either "accept" or "reject" in the second blank.arrow_forwardAssume you are the finance manager of Almanor Company, and the company is considering investing in one of the three projects. The life for both the Projects X, M and Project Y is 5 years. Project X costs OMR. 20500, Project M costs OMR. 20500 and Project Y costs OMR.20500. The discount rate/cost of capital is 4.15%. Required: Use the following techniques to help company to decide which Machine is better and justify why? a) Payback period b) Discount payback period c) Net Present Value d) Present value index -Profitability index. Year Project X Project M Project Y 7865 3748 8752 4567 7609 8393 3. 9676 4628 4508 7292 8905 7836 9904 0066 8287 (Ctrl) - 45arrow_forwardFindell Corporation is considering two projects, A and B, and it has gathered the following estimates for the projects Project A 5 years $84,480 $64,000 Project B 5 years $57,300 $50,000 Useful life Present value of cash inflows Present value of cash outflows What is the present value index for Project A?arrow_forward
- There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,500 $23,000 $5,500 $61,000 Beta Project 8,000 23,000 28,000 59,000 (Click here to see present value and future value tables) https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money A. If the discount rate is 12%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places. Alpha Project...? Beta Project...?arrow_forwardCompany A is considering two investment projects, Project X and Project Y. The initial investments and projected annual cash flows for each project are as follows: Project X: Initial Investment: $10,000 Annual Cash Flows: $2,500 for 5 years Project Y: Initial Investment: $15,000 Annual Cash Flows: $5,750 for 3 years Using the roll-over method, determine which project should be selected. Assume a 6% discount rate. The NPV of the preferred project is??arrow_forwardAssuming monetary benefits of a construction project at $50,000 per year, one-time costs (initial investment) of $15,000, recurring costs of $35,000 per year, a discount rate of 10 per cent, and a 4-year time horizon, calculate the net present value (NPV) of an information system's costs and benefits. Calculate the overall return on investment (ROI) of the project. During which year does break-even occur? Use the NPV template provided (modify to suit your answer) and clearly display the NPV, ROI, and year in which payback occurs. Write a paragraph explaining whether you would recommend investing in this project based on your financial analysis. Explain your answer referring to the NPV, ROI and payback for this project. Discount Rate (10%) Year 0 - 1.0000 Year 1 - .9091 Year 2 - .8264 Year 3 - .7513 Year 4 - .6830arrow_forward
- Find internal rate of return of a project with an initial cost of $43,000, expected net cash inflows of $9,550 per year for 8 years, and a cost of capital of 9.35%. Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72. A. 15.64% B. 14.90% C. 13.70% D. 14.75% E. 11.17%arrow_forwardTwo projects, Alpha and Beta, are being considered using the payback method. Each has an initial cost of $100,000. The annual cash flows for each project are listed below. a) What is the pay back period in years for Alpha? (round to two decimal places) b) What is the pay back period in years for Beta? (round to two decimal places) Year Project Alpha Project Beta 1 25,000 15,000 2 25,000 25,000 3 25,000 45,000 4 25,000 30,000 5 25,000 20,000 25,000 15,000arrow_forwardA small company wants to invest in Project A or B. The cash flows for both are shown below. Determine the payback period for each project assuming a MARR of 5% and suggest which project should be selected based on discounted payback period analysis.arrow_forward
- There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,192 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,000 $22,000 $5,000 $59,000 Beta Project 7,000 23,000 29,047 59,047 A. Calculate the internal rate of return on both projects. Use the IRR spreadsheet function to calculate internal rate of return. Alpha Project % Beta Project % B. Make a recommendation on which one to accept.arrow_forwardFind internal rate of return of a project with an initial cost of $43,000, expected net cash inflows of $9,550 per year for 8 years, and a cost of capital of 10.50%.Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72. Group of answer choices 15.05% 14.60% 14.90% 16.24% 17.73%arrow_forwardFocarrow_forward
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