Business, 27.08.2019 02:20 brooklyns357

You are considering two independent projects. the required rate of return is 11.25 percent for project a and 11.85 percent for project b. project a has an initial cost of $38,900 and cash inflows of $11,400, $16,900, and $26,200 for years 1 to 3, respectively. project b has an initial cost of $41,300 and cash inflows of $20,000 a year for three years. which project(s), if either, should you accept?

Answers: 3

Show answers

Answers

Answer from: jwyapo4

The net present value of project B is higher than Project A, so Project B should be accepted.

Explanation:

In this question, we have to use the net present value formula which is shown below:

Net present value = Present value of all years cash flows - Initial investment

where,

Present value of cash inflows is calculated by applying the discount rate which is presented below:

For this, we have to first compute the present value factor which is computed by a formula

= 1 ÷ (1 +rate) ∧ number of year

number of year = 0

number of year = 1

Number of year = 2

number of year = 3

So,

Rate = 11.25%

For year 1 = 0.8989 (1 ÷ 1.1125) ∧ 1

For year 2 = 0.8080 (1 ÷ 1.1125) ∧ 2

For year 3 = 0.7263 (1 ÷ 1.1125) ∧ 3

Now, multiply this present value factor with yearly cash inflows

For Project A,

The present value of year 1 = $11,400 × 0.8989 = $10,247.191

The present value of year 2 = $16,900 × 0.8080 = $13,654.842

The present value of year 3 = $26,200 × 0.7263 = $19028.354

and the sum of all year cash inflow is $42,930.387

So, the Net present value would be equal to

= $42,930.387 - $38,900 = $4,030.387

And,

For Project B

Rate = 11.85%

For year 1 = 0.8941(1 ÷ 1.1185) ∧ 1

For year 2 = 0.7993 (1 ÷ 1.1185) ∧ 2

For year 3 = 0.7146 (1 ÷ 1.1185) ∧ 3

Now, multiply this present value factor with yearly cash inflows

For Project B,

The present value of year 1 = $20,000 × 0.8941 = $17,881.091

The present value of year 2 = $20,000 × 0.7993 = $15,986.670

The present value of year 3 = $20,000 × 0.7146 = $14,292.955

and the sum of all year cash inflow is $48,160.716

So, the Net present value would be equal to

= $48,160.716 - $41,300 = 6,860.716

Since the net present value of project B is higher than Project A, so Project B should be accepted.

Answer from: Quest

It's if you can't see their account. much like a twitter block, they might tell you.

Answer from: Quest

Areceive reimbursement for your college visit costs b schedule a tour of the college campus c attend a college class to see what it’s like d both b & c e all of the above

Another question on Business

Business, 22.06.2019 07:30

Net income and owner's equity for four businesses four different proprietorships, jupiter, mars, saturn, and venus, show the same balance sheet data at the beginning and end of a year. these data, exclusive of the amount of owner's equity, are summarized as follows: total assets total liabilities beginning of the year $550,000 $215,000 end of the year 844,000 320,000 on the basis of the preceding data and the following additional information for the year, determine the net income (or loss) of each company for the year. (hint: first determine the amount of increase or decrease in owner's equity during the year.) jupiter: the owner had made no additional investments in the business and had made no withdrawals from the business. mars: the owner had made no additional investments in the business but had withdrawn $36,000. saturn: the owner had made an additional investment of $60,000 but had made no withdrawals. venus: the owner had made an additional investment of $60,000 and had withdrawn $36,000. jupiter net income $ mars net income $ saturn net income $ venus net income $

Answers: 3

Answer

Business, 22.06.2019 19:20

Six years ago, an 80-kw diesel electric set cost $160,000. the cost index for this class of equipment six years ago was 187 and is now 194. the cost-capacity factor is 0.6. the plant engineering staff is considering a 120-kw unit of the same general design to power a small isolated plant. assume we want to add a precompressor, which (when isolated and estimated separately) currently costs $13291. determine the total cost of the 120-kw unit. (hint: skip $ and comma symbols)

Answers: 3

Answer

Business, 22.06.2019 20:20

Xinhong company is considering replacing one of its manufacturing machines. the machine has a book value of $39,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. it has a current market value of $49,000. variable manufacturing costs are $33,300 per year for this machine. information on two alternative replacement machines follows. alternative a alternative b cost $ 115,000 $ 117,000 variable manufacturing costs per year 22,900 10,100 1. calculate the total change in net income if alternative a and b is adopted. 2. should xinhong keep or replace its manufacturing machine

Answers: 1

Answer

Business, 22.06.2019 20:40

Which of the following would indicate an improvement in a company's financial position, holding other things constant? a. the inventory and total assets turnover ratios both decline.b. the debt ratio increases.c. the profit margin declines.d. the times-interest-earned ratio declines.e. the current and quick ratios both increase.

Answers: 3

Answer

You know the right answer?

You are considering two independent projects. the required rate of return is 11.25 percent for proje...

Questions