Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value. Project X Project Y Initial investment $254,695 $175,822 Net cash flows anticipated: Year 1 83,000 35,000 Year 2 59,000 55,000 Year 3 91,000 71,000 Year 4 82,000 69,000 Year 5 75,000 27,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X % Project Y % B. Which project should be recommended.

Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value. Project X Project Y Initial investment $254,695 $175,822 Net cash flows anticipated: Year 1 83,000 35,000 Year 2 59,000 55,000 Year 3 91,000 71,000 Year 4 82,000 69,000 Year 5 75,000 27,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X % Project Y % B. Which project should be recommended.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.
Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
Pitt Company is considering two alternative Investments. The company requires a 12% return from its Investments. Neither option has a salvage value. Project X Project Y $243,046 $175,883 Initial Investment Net cash flows anticipated: Year 1 Year 2 Year 3 Year 4 Year 5 82,000 60,000 91,000 82,000 75,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X Project Y B. Which project should be recommended. Project X ✓ % % 35,000 54,000 73,000 69,000 26,000
Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value. Project X Project Y Initial investment $243,299 $174,530 Net cash flows anticipated: Year 1 83,000 34,000 Year 2 60,000 56,000 Year 3 91,000 71,000 Year 4 80,000 67,000 Year 5 76,000 27,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X _____% Project Y _____% B. Which project should be recommended. _____
Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value. Project X Project Y Initial investment $244,049 $180,396 Net cash flows anticipated: Year 1 83,000 35,000 Year 2 59,000 56,000 Year 3 91,000 71,000 Year 4 82,000 68,000 Year 5 77,000 27,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X fill in the blank 1% Project Y fill in the blank 2% B. Which project should be recommended.
Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value. Project X Project Y Initial investment $254,976 $176,440 Net cash flows anticipated: Year 1 82,000 36,000 Year 2 60,000 56,000 Year 3 91,000 72,000 Year 4 81,000 67,000 Year 5 77,000 26,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X fill in the blank 1% Project Y fill in the blank 2% B. Which project should be recommended. Project X
Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value. Project X Project Y Initial investment $180,000 $118,000 Net cash flows anticipated: Year 1 82,000 59,000 92,000 81,000 76,000 35,000 55,000 72,000 68,000 27,000 Year 2 Year 3 Year 4 Year 5 Calculate the Net Present Value for each project and indicate which the Pitt Company should choose.
Coffer Company is analyzing two potential investments. Project X Cost of machine Net cash flow: Year 1 Year 2 $ 85,470 Project Y $ 65,000 33,000 33,000 3,000 30,000 Year 3 Year 4 33,000 0 • 30,000 25,000 If the company is using the payback period méthod, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice Project Y. Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project.
Coffer Company is analyzing two potential investments. Cost of machine Project X $ 97,090 Net cash flow: Year 1 Year 2 Year 3 Year 4 Project Y $ 72,000 36,500 3,700 36,500 33,500 36,500 33,500 0 13,000 If the company is using the payback period method, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice ○ Project Y. ○ Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project. Project Y because it has a lower Initial Investment.
Harris Corporation has provided the following data concerning an investment project that it is considering: Initial investment Annual cash flow Salvage value at the end of the project Expected life of the project Discount rate $ 160,000 $ 54,000 $ 11,000 O $67,000 O $160,516 O $516 O $(5,776) 4 15 per year years % Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:
Banden Ltd is a highly geared entity that wishes to expand its operations. Six possible cap- ital investments have been identified, but the entity only has access to a total of £620,000. The projects are not divisible and may not be postponed until a future period. After the projects end it is unlikely that similar investment opportunities will occur. Expected net cash inflows (including salvage value) Year 1 4 5 Initial outlay Project £. 70,000 246,000 180,000 175,000 180,000 180,000 150,000 70,000 64,000 A 70,000 70,000 75,000 70,000 87,000 48,000 62,000 50,000 82,000 В 48,000 62,000 40,000 35,000 63,000 62,000 60,000 82,000 73,000 62,000 70,000 E 40,000 F Projects A and E are mutually exclusive. All projects are believed to be of similar risk to the company's existing capital investments. Any surplus funds may be invested in the money market to earn a return of 9 per cent per year. The money market may be assumed to be an efficient market. Banden's cost of capital is 12 per cent per…
Juniper Corporation is considering two alternative investment proposals with the following data: Proposal X Proposal Y Investment $810,000 $466,000 Useful life 8 years 8 years Estimated annual net cash inflows for 8 years $130,000 $70,000 Residual value $58,000 $− Depreciation method Straight−line Straight−line Required rate of return 13% 10% What is the accounting rate of return for Proposal X? (Round any intermediary calculations to the nearest dollar, and round your final answer to the nearest hundredth of a percent, X.XX%.)