1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. Wind Turbines Biofuel Equipment Present value of annual net cash flows Less amount to be invested Net present value 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index Wind Turbines Biofuel Equipment 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent. Wind Turbines Biofuel Equipment Present value factor for an annuity of $1

1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. Wind Turbines Biofuel Equipment Present value of annual net cash flows Less amount to be invested Net present value 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index Wind Turbines Biofuel Equipment 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent. Wind Turbines Biofuel Equipment Present value factor for an annuity of $1

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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Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service Company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Biofuel Equipment Year 1 2 3 4 Year 1 2 The wind turbines require an investment of $513,900, while the biofuel equipment requires an investment of $1,093,320. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest 12% 0.893 1.690 2.402 3.037 3.605 3 4 5 Wind Turbines 6 7 8 9 10 Required: $180,000 180,000 180,000 180,000 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 $360,000 360,000 360,000 360,000 5.759 6.145 4.111 4.564 4.968 5.328 5.650 15% 0.870 1.626 2.283 2.855 3.353 3.785 4.160 4.487 4.772 5.019 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 1a. Compute the net present value for each project. Use…
The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Wind Biofuel Year Turbines Equipment $270,000 $510,000 2 270,000 510,000 3 270,000 510,000 4 270,000 510,000 The wind turbines require an investment of $770,850, while the biofuel equipment requires an investment of $1,548,870. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Required: la. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the…
Crane Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $164,000 $180,500 $204,000 Annual net income: Year 1 14,420 18,540 27,810 2 14,420 17,510 23,690 3 14,420 16,480 21,630 4 14,420 12,360 13,390 5 14,420 9,270 12,360 Total $72,100 $74,160 $98,880 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)
A project has the following cash flows set out below. What is the profitability index of this project if the relevant discount rate is 2 percent? Enter your final answer to two decimal places. Year Cash flow 0 -1,745 1 537 2 2,066 3 3,912
(c) Compute the annual rate of return for each project. (Hint: Use average annual net income in your computation.) (Round answers to 2 decimal places, e.g. 10.50%.) Annual rate of return Project Bono % Project Edge % Project Clayton %
Crane Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $164,000 $180,500 $204,000 Annual net income: Year 1 14,420 18,540 27,810 2 14,420 17,510 23,690 14,420 16,480 21,630 4 14,420 12,360 13,390 14,420 9,270 12,360 Total $72,100 $74,160 $98,880 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view the factor table. Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) Project Bono years Project Edge years Project Clayton years
Consider the following project-balance profiles for proposed investment projects: Now consider the following statements:Statement 1: For Project A, the cash flow at the end of year 2 is $100.Statement 2: The future value of Project C is $0.Statement 3: The interest rate used in the Project B balance calculationsis 25%.Which of the preceding statements is (are) correct?(a) Just statement 1.(b) Just statement 2.(c) Just statement 3.(d) All of them.
Consider an investment project with the cash flows given in the table below. Compute the IRR for this investment. Is the project acceptable at MARR = 10%? The IRR for this project is %. (Round to one decimal place.) n 0 1 2 3 Cash Flow -$35,000 15,000 14,520 13,990
Calculate/estimate the IRR(s) for a 6-year project with the following cash flows: CF0 = -50, CF1 =28 = CF2 = CF3 = CF4 = CF5, and CF6 = -93. In Excel, plot the NPV (= Y axis) against r (= discountrate), using r = 0%, 2%, and so on until you find all IRRs in the chart. Identify/estimate all IRRs.
Most Company has an opportunity to invest in one of two new projects. Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $350,000 investment for new machinery with a three-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project Y Project z $350,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses $280,000 49,000 70,000 126,000 25,000 270,000 80,000 24,000 35,000 42,000 126,000 25,000 228,000 52,000 15,600 Pretax income Income taxes (30%) Net income $56,000 $ 36,400
*** By using the following table format, calculate: (a) Calculate the, the Payback Period, and the net Present Value of for each project. Calculation of Payback Period for each project: CUMULATIVE CASH FLOWS Project A Project B Project C £ £ £ Year 1 Year 2 Year 3 Year 4 Year 5 Payback Period (years and months) Calculation of Net Present Value for each project: Discount Factors Project A Project B Project C CF DCF CF DCF CF DCF £ £ £ £ £ £ Year 1 Year 2 Year 3 Year 4 Year 5 Total DCF Initial investment Net present value b) For each of the above methods of project appraisal recommend which project should be taken up. c) Using all the information gathered from the above techniques which…
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year 0 Cash Flow -$ 27,800 1 11,800 -23 3 14,800 10,800 If the required return is 18 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR %