Question

1.

Aerospace Dynamics will invest $158,000 in a project that will produce the following cash flows. The cost of capital is 11 percent. (Note that the fourth year’s cash flow is negative.) Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

  

Year	Cash Flow
1		$	49,000
2			59,000
3			50,000
4			(54,000	)
5			110,000

a. What is the net present value of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)
  

	Net present value

2.

Assume a $230,000 investment and the following cash flows for two products:

Year	Product X			Product Y
1	$	60,000		$	80,000
2		80,000			80,000
3		50,000			60,000
4		60,000			40,000

a. Calculate the payback for products X and Y. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
  

	Product X years Product Y years

3.

ou are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 14 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Project X (Videotapes of the Weather Report) ($42,000 Investment)						Project Y (Slow-Motion Replays of Commercials) ($62,000 Investment)
Year		Cash Flow				Year		Cash Flow
1		$	21,000			1		$	31,000
2			19,000			2			24,000
3			20,000			3			25,000
4			19,600			4			27,000

  
a. Calculate the profitability index for project X. (Do not round intermediate calculations and round your answer to 2 decimal places.)
  

	Profitability index

     

  
b. Calculate the profitability index for project Y. (Do not round intermediate calculations and round your answer to 2 decimal places.)
  

   

	Profitability index

  
c. Which project would you select?
  

	Project X
	Project Y

Answer 1

1)

*Please rate Thumbs up