Harrison, Inc. is considering two investment opportunities. Each investment costs $7,000 and will providethe same total future cash inflows. The schedule of estimated cash receipts for each investment follows(assume cash is received at year-end):16.17.b.C.Year 1Year 2Year 3Year 4Totald.Which investment should Harrison choose assuming all other variables for the two investments arethe same?a.Investment 1$3,0002,5002,0001,500$9,000Investment 2$1,0002,0003,0003,000$9,000Harrison should be indifferent between the two investments because they provide the sametotal cash inflows.Harrison should choose Investment I because of the time value of money.Harrison should be indifferent between the two investments because the initial cash outflow isthe same.Harrison should choose Investment II because it generates larger cash inflows at the end ofthe investment's useful life.C. $926d. $7,227Assuming an 8% minimum rate of return, what is the net present value of Investment 2 (round tothe nearest whole dollar)?a. ($7,000)b.$227

The question has asked to find out the correct option from the given options, and, compute the net…

Answered: the same total future cash inflows. The…

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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Morrisey Company has two investment opportunities. Both investments cost $6,900 and will provide the same total future cash inflows. The cash receipt schedule for each investment is given below: Investment I Investment II Period 1 $ 1,950 $ 1,950 Period 2 1,950 3,140 Period 3 2,950 4,330 Period 4 5,520 2,950 Total $12,370 $12,370 What is the net present value of Investment Il assuming an 12% minimum rate of return? (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round your intermediate calculations. Round your answer to the nearest whole dollar.) Multiple Choice $2,301 $9,201 $12,370 $(8,903)
Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $ 1,075 2 1,210 3 1,340 4 1,420 a. If the discount rate is 8 percent, what is the future value of the cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If the discount rate is 11 percent, what is the future value of the cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If the discount rate is 24 percent, what is the future value of the cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Assume a $55,000 investment and the following cash flows for two alternatives. Year Investment A Investment B $ 15,000 $35,000 1 2 25,000 10,000 20,000 15,000 25,000 3 4 20,000 a. Calculate the payback for investment A and B. (Round your answers to 2 decimal places.) Investment A years Investment B years b. Which investment would you select under the payback method? O Investment A O Investment B c. If the inflow in the fifth year for Investment A was $20,000,000 instead of $20,000, would your answer change under the payback method? Yes O No
ou are given three investment alternatives to analyze. The cash flows from these three investments are as follows: Investment End of Year A B C 1 $ 2,000 $ 2,000 $ 6,000 2 3,000 2,000 6,000 3 4,000 2,000 (6,000) 4 (5,000) 2,000 (6,000) 5 5,000 6,000 16,000 a. What is the present value of investment A at an annual discount rate of 13 percent? b. What is the present value of investment B at an annual discount rate of 13 percent? c. What is the present value of investment C at an annual discount rate of 13 percent?
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Assume a $50,000 investment and the following cash flowa for two aleternatives.. Year Investment A Investment B 1 $10,000 $20,000 2 $11,000 $25,000 3 $13,000 $15,000 4 $16,000 5 $30,000 Which alternative would you select under the payback method? 6
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Christie, Incorporated, has identified an investment project with the following cash flows. Year Cash Flow 1 $1,020 2 1,250 3 1,470 4 2,210 a. If the discount rate is 6 percent, what is the future value of these cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If the discount rate is 14 percent, what is the future value of these cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If the discount rate is 21 percent, what is the future value of these cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2…
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Park Company is considering an investment of $31,500 that provides net cash flows of $13,200 annually for four years. What is the investment's payback period? Numerator: 1 1 Payback Period Denominator: II II = II = Payback Period Payback period 0
Mendez Company has identified an investment project with the following cash flows. Year Cash Flow 1 2 3 $780 1,050 1,310 1,425 a. If the discount rate is 8 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value at 17 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the present value at 25 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Present value at 8% b. Present value at 17% c. Present value at 25%

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