Problem 12-14 (Algo) Net present value method [LO12-4] Aerospace Dynamics will invest $150,000 in a project that will produce the following cash flows. The cost of capital is 11 percent. (Note that the fourth year's cash flow is negative.) Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year 1 2 3 4 5 Cash Flow $ 49,000 60,000 52,000 (60,000) 110,000 a. What is the net present value of the project? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places. > Answer is complete but not entirely correct. Net present value $ 40,996.33 X b. Should the project be undertaken? yes ✔ no

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pts) Lloyd Enterprises Year 0 1 2 WN 3 45 5 has a project which has the following cash flows: Cash Flows ($) -158,000 27,000 66,000 103,000 130,000 29,000 The cost of capital is 10 percent. The project's discounted payback period is ..years.

Exercise 12-14 (Algo) Comparison of Projects Using Net Present Value [LO12-2] Labeau Products, Limited, of Perth, Australia, has $15,000 to invest. The company is trying to decide between two alternative uses for the funds as follows: Invest in Project X Invest in Project Y Investment required $ 15,000 $ 15,000 Annual cash inflows $ 5,000 Single cash inflow at the end of 6 years $ 36,000 Life of the project 6 years 6 years The company’s discount rate is 16%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project X. 2. Compute the net present value of Project Y. 3. Which project would you recommend the company accept?

Part B

Question 4 BAG Corporation is considering the following two projects; namely Project X and Project Y: Project X Cash Flow ($) Cash Flow ($) -80,000 Project Y Year 0 -100,000 10,000 20,000 60,000 40,000 30,000 60,000 Year 1 Year 2 Year 3 5,000 Year 4 60,000 The discount rate for Project X is 9%, and the discount rate for Project Y is 10%. a) i. Calculate the payback period for each project. ii. Suppose Project X and Project Y are mutually exclusive (you can choose either one of Project X and Project Y, but cannot choose both), which project(s) should be accepted if BAG Corporation requires a payback period of 3 years? i. Calculate the profitability index for each project. b) ii. Suppose Project X and Project Y are mutually exclusive, which project(s) should be accepted when the profitability index rule is considered? c) i. Calculate the net present value (NPV) for each project. ii. Suppose Project X and Project Y are mutually exclusive, which project(s) should be accepted when the NPV…