Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Part B please
Transcribed Image Text:Monty Manufacturing Company is considering three new projects, each requiring an equipment investment of $25,200. Each project will last for 3 years and produce the following cash flows.
Year
1
2
3
Total
AA
(a)
10,000
$8,000 $10,900 $12,000
11,000
16,000
BB
$34,000 $32,700
10,900
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10,900
Payback period
The salvage value for each of the projects is zero. Monty uses straight-line depreciation. Monty will not accept any project with a payback period over 2.2 years. Monty's minimum required rate of return is 12%.
Most desirable
Least desirable
CC
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Compute each project's payback period. (Round answers to 2 decimal places, e.g. 52.75.)
10,000
$33,000
Project CC
Project AA
AA
Indicating the most desirable project and the least desirable project using this method.
2.72 years
BB
2.31 years
CC
2.20 years
Attempts: 1 of 1 used
Transcribed Image Text:(b)
Compute the net present value of each project. (Use the above table.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275.)
Net present value $
Most desirable
Least desirable
Indicating the most desirable project and the least desirable project using this method.
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AA
Project CC
Project AA
Project BB
$
BB
CC
Attempts: 0 of 1 used
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