Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
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Question
Chapter 12, Problem 12.33AE
1.
To determine
The NPV of the project B for company W.
2.
To determine
The NPV of the project B for company W if it has zero residual value.
To conclude: If the project is still attractive if it has zero residual value.
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Check out a sample textbook solutionStudents have asked these similar questions
Using image:
a-1. What is the payback period for each project
a-2. If you apply the payback criterion, which investment will you choose?
b-1. What is the discounted payback period for each project?
b-2. If you apply the discounted payback criterion, which investment will you choose?
c-1. What is the NPV for each project?
c-2. If you apply the NPV criterion, which investment will you choose?
d-1. What is the IRR for each project?
d-2. If you apply the IRR criterion, which investment will you choose?
e-1. What is the profitability index for each project?
e-2. If you apply the profitability index criterion, which investment will you choose?
f. Based on your answers in (a) through (e), which project will you finally choose?
Compute the Profitability Index (PI) for each project?
Project A
Project B
Profitability Index (PI)
5- In light of your answers above, suppose that these two projects might be mutually exclusive or independent. According to these two assumptions, fill in the blanks in the table below with the suitable answer:
Points
Investment Criteria
If A and B are mutually exclusive, then I would select
If A and B are independent, then I would select
PBP
NPV
IRR
PI
1-Build an Excel Model to compute the NPV of investment project I or II and make sure that the model works (allows for changes in the inputs ,updates the output-NPV-and gives the same result).
2-Make your assumptions for a hypothetical project and compute the NPV. Then, show how NPV would change when you change specific inputs (ceteris paribus). Do this analysis for at least 3 inputs using scenario analysis or data tables, assigning different values to each input.
Chapter 12 Solutions
Managerial Accounting (5th Edition)
Ch. 12 - Prob. 1QCCh. 12 - (Learning Objective 2) After identifying potential...Ch. 12 - Prob. 3QCCh. 12 - Prob. 4QCCh. 12 - Prob. 5QCCh. 12 - Prob. 6QCCh. 12 - Prob. 7QCCh. 12 - Prob. 8QCCh. 12 - Prob. 9QCCh. 12 - (Learning Objective 5) Which of the following...
Ch. 12 - Order the capital budgeting process (Learning...Ch. 12 - Prob. 12.2SECh. 12 - Prob. 12.3SECh. 12 - Prob. 12.4SECh. 12 - Prob. 12.5SECh. 12 - Prob. 12.6SECh. 12 - Prob. 12.7SECh. 12 - Prob. 12.8SECh. 12 - Prob. 12.9SECh. 12 - Prob. 12.10SECh. 12 - Prob. 12.11SECh. 12 - Prob. 12.12SECh. 12 - Prob. 12.13SECh. 12 - Prob. 12.14SECh. 12 - Prob. 12.15SECh. 12 - Identify ethical standards violated (Learning...Ch. 12 - Prob. 12.17AECh. 12 - Compute payback period and analyze changes...Ch. 12 - Prob. 12.19AECh. 12 - Prob. 12.20AECh. 12 - Prob. 12.21AECh. 12 - Prob. 12.22AECh. 12 - Calculate the payback and NPV for a sustainable...Ch. 12 - Prob. 12.24AECh. 12 - Prob. 12.25AECh. 12 - Prob. 12.26AECh. 12 - Prob. 12.27AECh. 12 - Prob. 12.28AECh. 12 - Prob. 12.29AECh. 12 - Prob. 12.30AECh. 12 - Prob. 12.31AECh. 12 - Prob. 12.32AECh. 12 - Prob. 12.33AECh. 12 - Prob. 12.34AECh. 12 - Prob. 12.35AECh. 12 - Prob. 12.36BECh. 12 - Prob. 12.37BECh. 12 - Prob. 12.38BECh. 12 - Prob. 12.39BECh. 12 - Prob. 12.40BECh. 12 - Prob. 12.41BECh. 12 - Prob. 12.42BECh. 12 - Prob. 12.43BECh. 12 - Prob. 12.44BECh. 12 - Prob. 12.45BECh. 12 - Prob. 12.46BECh. 12 - Prob. 12.47BECh. 12 - Prob. 12.48BECh. 12 - Prob. 12.49BECh. 12 - Prob. 12.50BECh. 12 - Prob. 12.51BECh. 12 - Prob. 12.52BECh. 12 - Prob. 12.53BECh. 12 - Prob. 12.54BECh. 12 - Prob. 12.55APCh. 12 - Prob. 12.56APCh. 12 - Prob. 12.57APCh. 12 - Prob. 12.58APCh. 12 - Prob. 12.59BPCh. 12 - Prob. 12.60BPCh. 12 - Evaluate an investment using all four methods...Ch. 12 - Prob. 12.62BPCh. 12 - Prob. 12.63SCCh. 12 - Discussion Questions 1. Describe the capital...Ch. 12 - Prob. 12.65ACTCh. 12 - Prob. 12.66ACTCh. 12 - Prob. 12.67ACT
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- Build an Excel Model to compute the NPV of investment project I or II and make sure that the model worksarrow_forwardDwight Donovan, the president of Campbell Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $102,000 and for Project B are $47,000. The annual expected cash inflows are $32,178 for Project A and $15,474 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Campbell Enterprises' desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Compute the net present value of each project. Which project should be adopted based on the net present value approach? b. Compute the approximate…arrow_forwardb) Using data provided below, compute appropriate values and fill the table below to help identify the least risky and most risky project among alternatives A, B and C using appropriate criteria. Project EV D D2 Var St. dev Coef.0f Var TT 12 0.2 A 18 0.7 28 0.1 10 0.3 В 22 0.6 32 0.1 11 0.1 C 21 0.8 31 0.1 Where n denotes the profit, P is the probability, EV stand for Expected value, D is the Deviation, D$ denote the deviation square, St. dev is the standard deviation and finally Coef.of Var is the coefficient of variation.arrow_forward
- n 0 1 2 3 4 5 6 7 8 9 10 A -$250 $60 $970 B -$200 $90 $90 $60 $60 Net Cashflow с -$70 $20 $10 $5 -$50 $60 $50 $40 $30 $20 $10 D -$300 $270 $250 -$129 -$20 $120 $40 E -$90 -$100 -$50 $0 $150 $150 $100 $100arrow_forwardBased on the picture, a. Calculate the Internal Rate of Return for the project. b. If you were the financial manager, would you accept this project? Why? Please help me ASAP. Thanks!arrow_forward(a) If you apply the payback decision rule, which investment will you choose? Why? (b) If you apply the NPV decision rule, which investment will you choose? Why? (c) If you apply the IRR decision rule, which investment will you choose? Why? (d) Based on your answers of (a) to (c), which project will you (eventually) choose? Why?arrow_forward
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