Project C1 | |||||
Initial Investment | $306,000 | ||||
Chart Values are Based on | |||||
i= | 9% | ||||
Year |
Cash Inflow |
x | PV Factor | = |
Present Value |
1 | $38,000 | x | 0.91743 | = | $34,862 |
2 | $134,000 | x | 0.84168 | = | $112,785 |
3 | $194,000 | x | 0.77218 | = | $149,803 |
$297,450 | |||||
Present value of cash inflows | $297,450 | ||||
Present value of cash outflow | $306,000 | ||||
Net present value | -$8,550 | ||||
Project C2 | |||||
Initial Investment | $306,000 | ||||
Chart Values are Based on | |||||
i= | 9% | ||||
Year |
Annual Cash Inflow |
x | PVA Factor | = |
Present Value |
1-3 | $122,000 | x | 2.53129 | = | $308,817 |
Present value of cash inflows | $308,817 | ||||
Present value of cash outflow | $306,000 | ||||
Net present value | $2,817 | ||||
Note - Since,the cash flow in the years 1 to 3 is | |||||
uniform at $ 122,000 we will use the Present Value of | |||||
Annuity factor to compute the present value of cash | |||||
flows | |||||
Project C3 | |||||
Initial Investment | $306,000 | ||||
Chart Values are Based on | |||||
i= | 9% | ||||
Year |
Cash Inflow |
x | PV Factor | = |
Present Value |
1 | $206,000 | x | 0.91743 | = | $188,991 |
2 | $86,000 | x | 0.84168 | = | $72,384 |
3 | $74,000 | x | 0.77218 | = | $57,141 |
$318,516 | |||||
Present value of cash inflows | $318,516 | ||||
Present value of cash outflow | $306,000 | ||||
Net present value | $12,516 | ||||
Since, the net present value at the required rate of 9% | |||||
is highest for Project C3,Phoenix Company should | |||||
acquire Project C3 |
Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project...
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A company can invest in each of three cheese-making projects: C1, C2 and C3. Each project requires an initial investment of $312,000 and would yield the following annual cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Year 1 Year 2 Year 3 Totals ci $ 40,000 136,000 196,000 $372,000 c2 $124,000 124,000 124,000 $372,000 $208,000 88,000 76,000 $372,000 1. Assume that the company requires a 9% return from its investments. Using net present...
i was not given the PV factor table Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $264,000 and would yield the following annual cash flows PV of $1. FV of $1. PVA of $1, and EVA of S1) (Use appropriate factor(s) from the tables provided.) Year 1 $ 24,000 120,000 180.00 5108,000 1e8,eee les.ee $324.ee $ 192,000 72.000 60,000 $324.000 $324.00 1. Assume that the company requires...
Most Company has an opportunity to invest in one of two new projects. Project Y requires a $320,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $320,000 investment for new machinery with a four-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. (FV of $1, PV of $1, FVA of $1 and PVA...
Most Company has an opportunity to invest in one of two new projects. Project Y requires a $315,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $315,000 investment for new machinery with a four-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...