Chapter 11 Homework-xThe Management Of Kurx ? C | ? ezto.mheducation.com/hm.tpx

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Chapter 11 Homework-xThe Management Of Kurx ? C | ? ezto.mheducation.com/hm.tpx Exerclse 11-11 Custom Alternate Problem A company has $30,000 to invest. It must decide between two alternative uses for the funds as follows Invest inInvest in Project 1Project 2 $30,000 $30,000 $ 7,000 ent required Annual cash inflows $ 60,000 Single cash inflow at the end of 7 years Life of the project The company's discount rate is 12%. Click here to view Exhibit 118-1 and Exhibit 118-2, to determine the appropriate discount factor(s) using tables. Required: a. Determine the net present values. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s). When you enter a factor, use a whole number followed by 3 decimal places, for example: 0.123 or 3.456.) Year(s)Cash Flow 126 PV Factor Present Value Itém Project 1 ent required Now 1.000

Explanation / Answer

Project 1 should be accepted as the NPV is positive.

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Item Years Cashflow 12% PV Factor Present Value of Cashflows Project 1 Investment Required Now $     (30,000) 1.000 $      (30,000.00) Annual Cash inflows 1-7 $          7,000 4.564 $        31,948.00 Net Present values $          1,948.00 Project 2 Investment Required Now $     (30,000) 1.000 $      (30,000.00) Single Cash inflows 7 $        60,000 0.452 $        27,120.00 Net Present values $        (2,880.00)

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