McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $523,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $72,100.
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Homework Answers
| Net Present value - Project A | 49668 |
| Profitability Index - Project A | 1.09 |
| Net Present value - Project B | 42312 |
| Profitability Index - Project B | 1.12 |
| Based on net Present value, Project A should be accepted | |
| Based on Profitability Index, Project B should be accepted | |
| Workings: | |
| Project A: | |
| Net annual cash flows | 72100 |
| X PV factor | 7.94269 |
| Present value of Net annual cash flows | 572668 |
| Less: Investment cost | 523000 |
| Net Present value | 49668 |
| Present value of Net annual cash flows | 572668 |
| Divided by Investment cost | 523000 |
| Profitability index | 1.09 |
| Project B: | |
| Net annual cash flows | 50400 |
| X PV factor | 7.94269 |
| Present value of Net annual cash flows | 400312 |
| Less: Investment cost | 358000 |
| Net Present value | 42312 |
| Present value of Net annual cash flows | 400312 |
| Divided by Investment cost | 358000 |
| Profitability index | 1.12 |
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McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $523,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $72,100.
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $522,828,...
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $522,828, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $72,100. Project B will cost $324,141, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $46,400. A discount rate of 7 % is appropriate for both projects....
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exclusive capital expenditure proposals. Project A will cost
$509,000, has an expected useful life of 12 years, a salvage value
of zero, and is expected to increase net annual cash flows by
$74,100. Project B will cost $342,000, has an expected useful life
of 12 years, a salvage value of zero, and is expected to increase
net annual cash flows by $50,700. A discount rate of 8% is
appropriate for both projects.
Compute...
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McKnight Company is considering two different, mutually
exclusive capital expenditure proposals. Project A will cost
$509,000, has an expected useful life of 12 years, a salvage value
of zero, and is expected to increase net annual cash flows by
$74,100. Project B will cost $342,000, has an expected useful life
of 12 years, a salvage value of zero, and is expected to increase
net annual cash flows by $50,700. A discount rate of 8% is
appropriate for both projects.
Compute...
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Question 3 McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $542,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $74,500. Project B will cost $338,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $48,000. A discount rate of 7% is appropriate for both...
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Profect A will cost $508,824, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $74,100. Project B will cost $341,779, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $50,700. A discount rate of 8% is appropriate for both projects. Compute...
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