CONNECT ONLINE ACCESS F/MANAGERIAL ACC.
6th Edition
ISBN: 9781264445356
Author: Noreen
Publisher: MCG
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Chapter 7A, Problem 7A.1E
To determine
Concept Introduction:
The
the present value of cash inflows for each investment.
Expert Solution & Answer
Answer to Problem 7A.1E
The present value of cash inflows for each investment is as follows:
Investment A =$ 18,519
Investment B =$ 21,832
Explanation of Solution
The present value of cash inflows for each investment is calculated as follows:
| Investment A | Investment B | |||||
| PVF (18%) | PV | Cash inflow | PV | |||
| A | B | C=A*B | D | E=A*D | ||
| Year 1 | 0.84746 | $ 3,000 | $ 2,542 | $ 12,000 | $ 10,169 | |
| Year 2 | 0.71818 | $ 6,000 | $ 4,309 | $ 9,000 | $ 6,464 | |
| Year 3 | 0.60863 | $ 9,000 | $ 5,478 | $ 6,000 | $ 3,652 | |
| Year 4 | 0.51579 | $ 12,000 | $ 6,189 | $ 3,000 | $ 1,547 | |
| Present value of cash inflow | $ 18,519 | $ 21,832 | ||||
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Students have asked these similar questions
Consider the following two mutually exclusive projects:
Year Cash Flow (A) Cash Flow (B)
-$ 15,456
5,225
8,223
13,013
8,705
0
1
234
-$ 276,363
26,400
51,000
57,000
402,000
Whichever project you choose, if any, you require a 6 percent return on your investment.
a. What is the payback period for Project A?
Payback period
b. What is the payback period for Project B?
Payback period
c. What is the discounted payback period for Project A?
Discounted payback period
You are asked to evaluate an investment project with the following cash flows:
Year
1
234.
2
4
Cash Flow
$800
1,090
1,350
1,475
a. If the discount rate is 7 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 7%
b. Present value at 17%
c. Present value at 25%
$
3,926.98
The following information regarding an investment project is available.
Discount rate
7%
Year
Cash Flow
0
(£125,000)
1
£60,000
2
£50,000
3
£10,000
4
£10,000
5
£50,000
A). What is the Net Present Value of the Project?
Choose one from the following:
A.
£56,076
B.
£43,670
C.
£125,000
D.
£26,188
Chapter 7A Solutions
CONNECT ONLINE ACCESS F/MANAGERIAL ACC.
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