Answer | |||||||||||
Solar | Wind | ||||||||||
Present value of annual cash flows | 52380 | 132950 | |||||||||
Initial investment | 38000 | 104300 | |||||||||
Net Present Value (NPV) = | PV of annual cash flow - Initial investment | 14380 | 28650 | ||||||||
Profitability Index (PI) = | PV of annual cash flow / Initial investment | 1.378421 | 1.274688 | ||||||||
The company should use Wind Energy because NPV is higher in wind Energy. NPV is the best measure of investment evaluation compared to Profitability Index. |
Ranger Corporation has decided to invest in renewable energy sources to meet part of its energy...
Swifty Corporation has decided to invest in renewable energy sources to meet part of its energy needs for production. It is considering solar power versus wind power. After considering cost savings as well as incremental revenues from selling excess electricity into the power grid, it has determined the following. Solar Wind Present value of annual cash flows $52,608 $129,765 Initial investment $38,400 $105,500 Determine the net present value and profitability index of each project. (If the net present value is...
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $592,821, has an expected useful life of 15 years, a salvage value of zero, and is expected to increase net annual cash flows by $75,000. Project B will cost $396,957, has an expected useful life of 15 years, a salvage value of zero, and is expected to increase net annual cash flows by $51,400. A discount rate of 8% is appropriate for both projects. Click...
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $464,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $68,100. 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 $50,900. A discount rate of 8% is appropriate for both projects. Click...
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....
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...
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $400,000, has an expected useful life of 10 years, a salvage value of zero, and is expected to increase net annual cash flows by $70,000. Project B will cost $310,000, has an expected useful life of 10 years, a salvage value of zero, and is expected to increase net annual cash flows by $55,000. A discount rate of 9% is appropriate for both projects. Compute...
Vaughn Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $506,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $69,900. Project B will cost $314,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $45,200. A discount rate of 7% is appropriate for both projects. Click...
Brief Exercise 26-5 McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $450,241, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $73,500. Project B will cost $298,321, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $50,200. A discount rate of 9% is appropriate for...
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...