Yancey Company has limited funds available for investment and must ration the fu
ID: 2361403 • Letter: Y
Question
Yancey Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows:
The net present values above have been computed using a 8% discount rate. The company wants your assistance in determining which project to accept first, which to accept second, and so forth. The company
Project InvestmentRequired Net
Present
Value Life of
the
Project
(years) Internal
Rate
of Return A $825,000 $186,000 7 14.31% B $675,000 $180,000 14 12.36% C $580,000 $205,800 10 15.35% D $764,000 $163,744 3 19.53%
Explanation / Answer
PI = 1 + NPV/Initial Investment. Project A, PI = 1 + 186000/825000 = 1.225454545 Project B, PI = 1 + 180000/675000 = 1.266666667 Project C, PI = 1 + 205800/580000 = 1.354827586 Project D, PI = 1 + 163,744/764,000 = 1.214324607 NPV First preference C Second preference A Third preference B Fourth preference D IRR First preference D Second preference C Third preference A Fourth preference B PI First preference C Second preference B Third preference A Fourth preference D
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.