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Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $330,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals Project C1 $ 46,000 142,000 202,000 $ 390,000 Project C2 $ 130,000 130,000 130,000 $ 390,000 a. The company requires a 8% 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 8% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Project C1 Net Cash Flows X Present Value of 1 at 8% Year 1 Year 2 Year 3 Totals Present Value Project C2 Net Cash Flows X of 1 at 8% Year 1 Year 2 Year 3 Totals Which projects, if any, should be accepted Present Value of Net Cash Flows ။ 11 = IF Present Value of Net Cash Flows

Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $330,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals Project C1 $ 46,000 142,000 202,000 $ 390,000 Project C2 $ 130,000 130,000 130,000 $ 390,000 a. The company requires a 8% 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 8% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Project C1 Net Cash Flows X Present Value of 1 at 8% Year 1 Year 2 Year 3 Totals Present Value Project C2 Net Cash Flows X of 1 at 8% Year 1 Year 2 Year 3 Totals Which projects, if any, should be accepted Present Value of Net Cash Flows ။ 11 = IF Present Value of Net Cash Flows

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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Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $330,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals Project C1 $ 46,000 142,000 202,000 $ 390,000 Project C2 $ 130,000 130,000 130,000 $ 390,000 a. The company requires a 8% 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 8% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.
Transcribed Image Text:Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $330,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals Project C1 $ 46,000 142,000 202,000 $ 390,000 Project C2 $ 130,000 130,000 130,000 $ 390,000 a. The company requires a 8% 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 8% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.
Project C1 Net Cash Flows X Present Value of 1 at 8% Year 1 Year 2 Year 3 Totals Present Value Project C2 Net Cash Flows X of 1 at 8% Year 1 Year 2 Year 3 Totals Which projects, if any, should be accepted Present Value of Net Cash Flows ။ 11 = IF Present Value of Net Cash Flows
Transcribed Image Text:Project C1 Net Cash Flows X Present Value of 1 at 8% Year 1 Year 2 Year 3 Totals Present Value Project C2 Net Cash Flows X of 1 at 8% Year 1 Year 2 Year 3 Totals Which projects, if any, should be accepted Present Value of Net Cash Flows ။ 11 = IF Present Value of Net Cash Flows
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