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Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $264,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Project Cl $ 24,000 120,000 180,000 Project C2 $ 108,000 108,000 108,000 $ 324,000 $ 324,000 Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Project C1 Year 1 Year 2 Year 3 Totals Initial investment Present value of cash inflows Project C2 Year 1 Year 2 Year 3 Net Cash Flows x $ $ Net Cash Flows $ $ 24,000 X 120,000 X 180,000 X 324,000 Totals Initial investment Present value of cash inflows Which projects, if any, should be accepted 108,000 108,000 108,000 324,000 X X x X Present Value of 1 at 10% 0.9090 0.8260 X = 0.7534 X = Present Value of 1 at 10% 0.9090 0.8260 0.7534 = = Present Value of Net Cash Flows $ $ $ 21,622 97,395 $ 135,612 254,629 264,000 (13,369) Present Value of Net Cash Flows $ 97,297 89,208 81,367 267,872 264,000 $ Project C1 (79) X

Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $264,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Project Cl $ 24,000 120,000 180,000 Project C2 $ 108,000 108,000 108,000 $ 324,000 $ 324,000 Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Project C1 Year 1 Year 2 Year 3 Totals Initial investment Present value of cash inflows Project C2 Year 1 Year 2 Year 3 Net Cash Flows x $ $ Net Cash Flows $ $ 24,000 X 120,000 X 180,000 X 324,000 Totals Initial investment Present value of cash inflows Which projects, if any, should be accepted 108,000 108,000 108,000 324,000 X X x X Present Value of 1 at 10% 0.9090 0.8260 X = 0.7534 X = Present Value of 1 at 10% 0.9090 0.8260 0.7534 = = Present Value of Net Cash Flows $ $ $ 21,622 97,395 $ 135,612 254,629 264,000 (13,369) Present Value of Net Cash Flows $ 97,297 89,208 81,367 267,872 264,000 $ Project C1 (79) X

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
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Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $264,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net cash flows. Year 1 Year 2 Year 3 Totals a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Required A Project C1 $ 24,000 120,000 180,000 $ 324,000 Complete this question by entering your answers in the tabs below. Required B Project C1 Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Totals Initial investment Present value of cash inflows Project C2 Net Cash Flows $ Project C2 $ 108,000 108,000 108,000 $ 324,000 $ $ Net Cash Flows Totals Initial investment Present value of cash inflows Which projects, if any, should be accepted $ 24,000✔ X 120,000✔✓ x 180,000 ✓ X 324,000 Answer is not complete. X 108,000✔ x 108,000 ✓ X 108,000✔✔✔ X 324,000 Present Value of 1 at 10% 0.9090 0.8260 x 0.7534 = Present Value of 1 at 10% < Required A = = = B 0.9090 0.8260 = 0.7534 = = Present Value of Net Cash Flows $ ✓ × $ $ 21,622 X 97,395 X 135,612 254,629 Present Value of Net Cash Flows Required B 264,000✔ (13,369) X 97,297 X 89,208 81,367 267,872 264,000✔ (79) X X ✓ X $ Project C1 >
Transcribed Image Text:Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $264,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net cash flows. Year 1 Year 2 Year 3 Totals a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Required A Project C1 $ 24,000 120,000 180,000 $ 324,000 Complete this question by entering your answers in the tabs below. Required B Project C1 Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Totals Initial investment Present value of cash inflows Project C2 Net Cash Flows $ Project C2 $ 108,000 108,000 108,000 $ 324,000 $ $ Net Cash Flows Totals Initial investment Present value of cash inflows Which projects, if any, should be accepted $ 24,000✔ X 120,000✔✓ x 180,000 ✓ X 324,000 Answer is not complete. X 108,000✔ x 108,000 ✓ X 108,000✔✔✔ X 324,000 Present Value of 1 at 10% 0.9090 0.8260 x 0.7534 = Present Value of 1 at 10% < Required A = = = B 0.9090 0.8260 = 0.7534 = = Present Value of Net Cash Flows $ ✓ × $ $ 21,622 X 97,395 X 135,612 254,629 Present Value of Net Cash Flows Required B 264,000✔ (13,369) X 97,297 X 89,208 81,367 267,872 264,000✔ (79) X X ✓ X $ Project C1 >
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