Question

431 Chapter 10 Capital Investment Analysis -2 p414 PE 10-2A Cash payback period OBJ.2 Determine the as estimated annual net cash flows of $118,600. It is estimated to cost $616,720. cash payback period. Round to one decimal place. Cash payback period -2 p414 PE 10.2B OBJ. 2 project has estimated annual net cash flows of $9.300. It is estimated to cost $41,850 Determine the cash payback period. Round to one decimal place. 3 p419 PE 10-3A Net present value 818 A project has estimated annual net cash flows of $6,800 for five years and is estimated to cost $23,125. Assume a minimum acceptable rate of return of12%. Using Exhibit 5, (1) the net present value of the project and (2) the present value index, rounded to two decimal places 3 p419 PE 10-3B Net present value A project has estimated annual net cash flows of $96,200 for four years and is estimated to cost $315,500. Assume a minimum, acceptable rate of return of 10%. Using Exhibit 5, determine (1) the net present value of the project and (2) the present value index rounded to two decimal places OBJ. 3 4 p421 PE 10-4A Internal rate of return A project is estimated to cost $104,328 and provide annual net cash flows of $21,000 for eight years. Determine the internal rate of return for this project, using Exhibit 5 PE 10-4B A project is estimated to cost $362,672 and provide annual net cash flows of $76,000 for nine years. Determine the internal rate of return for this project, using Exhibit 5 4 p421 Internal rate of return PE 10-5A Net present value-unequal lives Project A requires an original investment of $32,600. The project will yield cash flows of $7,000 Bi- year for nine years. Project B has a calculated net present value of $3,500 over a six-year per life. Project A could be sold at the end of six years for a price of $15,000. (a) Determine the net present value of Project A over a six-year life, with residual value, assuming a minimum rate of return of 12% (b) which project provides the greatest net present value? OBJ. 4 Net present value-unequal lives PE 10-5B Project 1 requires an original investment of $55,000. The project will yield cash flows . Project 2 has a calculated net present value of $15,000 per year for seven years 000 o of $38,000. residual value, assuming a minimum rate of return of 20%, (b) which the greatest net present value? ver a four-year life. Project 1 could be sold at the end of four years for a price (a) Determine the net present value of Project 1 over a four-year life, with project provides

Answer 1

Sol PE 10-2A

Payback period =

Initial Investment/ Cash inflow per year

Initial investment = $616,720

Estimated annual net cash flows= $118,600

So payback period= 616,720/118,600 = 5.2 years